WASHINGTON has limited its initial funding for the rebuilding of Iraq to less than $2.5 billion (£1.6 billion), well below the country’s estimated needs, in the hope that other countries will also provide money.

President Bush has won congressional approval for $2.4 billion to go on immediate reconstruction and humanitarian needs as part of a $79billion emergency war budget. The funds will be spent by Jay Garner, the retired army general overseeing the first phase of the development of post-Saddam Iraq.

The figure falls well short of the $20 billion that bodies such as the Council on Foreign Relations say that Iraq needs every year for several years. But the US Agency for International Development

(USAID), the government aid organisation, is also signing contracts for aid projects from road and water construction schemes to schooling from its existing budget.

The US has not ruled out a further round of reconstruction cash in the budget next year. But officials are emphasising that, largely owing to Iraq’s oil reserves, the country’s aid needs are limited to the short term. “Iraq is not Afghanistan. You can’t compare the two. Iraq has much more infrastructure,” one official said.

They are also emphasising that they want other countries to pitch in to help the reconstruction effort. However, the US is sending out potentially contradictory messages: that Iraq will not need sustained aid, but that quick financial help from other countries is needed.

The US has deliberately avoided putting a figure on Iraq’s estimated reconstruction needs, and is preparing for difficult negotiations with allies who refused to back the war and who have strong economic ties with Iraq, such as France, Russia and Germany.

All three have refused initial American requests that they write off debts owed by Saddam Hussein’s regime. But US officials are encouraged that they have signalled they are prepared to at least reschedule them. Although Iraq boasts the world’s second-largest oil reserves, it also has $383 billion of unpaid loans, legal claims and outstanding contracts — more international debt than any other country.

Mr Bush has his battles at home, where the size of the reconstruction bill and who gets to spend it have already become contentious issues. It required an intensive eleventh-hour lobbying effort by Dick Cheney, the Vice-President, to persuade a reluctant Congress to give the White House discretion over how the $2.4 billion was spent. Both Houses of Congress wanted to give authority to the State Department, the traditional body for such spending, but Mr Bush wanted the money to be spent through the Pentagon, which is overseeing General Garner’s Office of Humanitarian Assistance and Reconstruction. He won.

There is also doubt about whether USAID will be compensated for the reconstruction contracts that it is signing. One

USAID official said it was hoping to receive at least $1 billion of the $2.4 billion. But a White House official said that USAID would have to cover Iraqi reconstruction from existing budgets.

So far USAID has signed four contracts with American companies, worth $21.7 million. They include $2million to a Washington-based consulting firm to work on remodelling Iraq’s primary and secondary schools. The contract is expected to grow to $62 million to include upgrading schools, restocking classrooms, training teachers and overhauling the Saddam-orientated curriculum.

Initial contracts have also been signed to cover a project encouraging Iraqis to participate in all phases of the transition to democracy ($7.9 million), administering the port at Umm Qasr ($4.8 million) and providing personnel support to USAID ($7 million for an initial 90 days, with one-year renewals).

USAID will also sign a $600 million construction contract for rebuilding roads, bridges, water and sanitation systems and electrical supply. Other pending contracts cover airport administration, public health, logistical support and a community action programme. Japan has promised $100million in humanitarian aid, but the international effort will fall far short of that after the 1991 Gulf War, when Japan, Kuwait, Saudi Arabia and the United Arab Emirates paid 90 per cent of the $61 billion cost.

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