Deputy Defence Secretary Paul Wolfowitz, in a decision dated December 5, cited "essential security interests" of the United States and the need to encourage countries to provide troops for Iraq as the reason for limiting competition for 18.6 billion dollars in prime contracts.

They range from equipping the new Iraqi army to rebuilding and refurbishing power and water plants, roads, oil installations and communications systems.

Meantime Reuters said two American soldiers were killed yesterday in separate attacks in Iraq.

One soldier died and three were wounded when a roadside bomb hit their convoy in the northern Iraqi city of Mosul, the US military said.

"One soldier was killed and three were injured," said a spokesman for the 101st Airborne Division in the city.

In the northern city of Mosul, another soldier was killed when insurgents fired upon troops guarding a gas station, the US Army said.

Another US soldier was wounded in the incident.

Meantime, the US decision, which was posted on a Pentagon website, lists 63 countries that are eligible to compete for some 26 prime contracts that cover the sweep of Iraq's reconstruction needs.

Conspicuously absent from the list are the countries that opposed the war and have declined to send troops to join in the post-war occupation of Iraq, including France, Germany, Russia and Canada.

"It is necessary for the protection of the essential security interests of the United States to limit competition for the prime contracts of these procurements to companies from the United States, Iraq, coalition partners and force contributing nations," the Wolfowitz finding said.

"Thus it is clearly in the public interest to limit prime contracts to companies from these countries," it said.

The document said "every effort must be made to expand international cooperation in Iraq."

It noted that since the end of major combat operations, the number of coalition troops from countries other than the United States has increased from 14,000 to 23,7000, allowing the number of US troops to drop by 12,000.

"Limiting competition for prime contracts will encourage the expansion of international cooperation in Iraq and in future efforts," it said.

Funding for the contracts comes from the 18.6 billion dollars approved by Congress last month in supplemental spending to underwrite a massive reconstruction program in Iraq.

Companies barred from competing as prime contractors will still be able to work as sub-contractors on the Iraqi projects, said Major Joe Yoswa, a Pentagon spokesman.

But Wolfowitz's decision indicates that Washington intends to turn up the pressure on countries that oppose its Iraq policy by making their influential business sectors pay a price.

That could further poison relations with Germany and France, erstwhile allies that the Pentagon portrayed during the war as isolated representatives of "old Europe."

US efforts to raise troops and international funding for Iraq have so far fallen short of Washington's expectations.

The European Union pledged 1.3 billion for Iraq's reconstruction, but France and Germany have withheld individual contributions.

The Pentagon for its part failed to find troops to fill a third multinational division in time for deployment early next year, forcing the redeployment of a Marine division that recently returned from Iraq.

The army, meanwhile, has warned that returning divisions will be at a low state of readiness for up to six months, leaving only two combat ready divisions available as reinforcements in the event of a second war in Korea or elsewhere.

General Richard Myers, the chairman of the Joint Chiefs of Staff, declared flatly Tuesday that the US military can meet any contingency.