Blackwater may lose license to work in Iraq, report says

WASHINGTON - An internal State Department report says Blackwater Worldwide may lose its license to work in Iraq and recommends that the agency prepare alternate means to protect its diplomats there.

The 42-page draft report by the State Department's inspector general says the department faces "numerous challenges" in dealing with the security situation in Iraq, including the prospect that Blackwater may be barred from the country. The department would have to turn to other security arrangements to replace Blackwater, officials said.

The State Department had no immediate comment on the report, but deputy spokesman Robert Wood said that after the probe is complete, officials would look at "whether the continued use of Blackwater in Iraq is consistent with the US government's goals and objectives."

It is not clear how the State Department would replace Blackwater. It relies heavily on private contractors to protect its diplomats in Iraq, as its own security service does not have the manpower or equipment to do so. The report suggests that one way to fill the void would be for the State Department's Diplomatic Security Service to beef up its presence in Iraq.

"The department faces the real possibility that one of its primary Worldwide Personal Protective Services contractors in Iraq - Blackwater (Worldwide) - will not receive a license to continue operating in Iraq," says the recently completely report.

The report is labeled "sensitive but unclassified."

An official familiar with the report said initially that it would recommend that the department not renew Blackwater's contract when it expires next year. But that specific language is not included in the document, a copy of which was obtained by The Associated Press.

The official said later that such a recommendation would not be made until after an investigation of last September's incident in Baghdad's Nisoor Square, in which Blackwater guards killed 17 Iraqis, is complete. Five guards have been indicted on manslaughter and other charges in that incident. The company was not implicated.

A decision on how US diplomats in Iraq are to be protected will be left to the Obama administration, which will be in place when Blackwater's contract comes up for renewal in the spring. Terminating the North Carolina-based company's Iraq contract would be difficult for incoming Secretary of State Hillary Rodham Clinton because no other private security contractor has its range of resources, particularly its fleet of helicopters and planes.

Secretary of State Condoleezza Rice ordered a review of the department's use of private security firms after the Nisoor Square incident. The inspector general's report is an analysis of how recommendations in that review have been implemented.

Blackwater spokeswoman Anne Tyrell declined to comment, saying the company has not yet seen the report.