Annan and Schroeder both condemn the US contracting ban

The UN Secretary General has added his voice to criticism of Washington's decision to bar countries opposing the Iraq war from reconstruction contracts.

Kofi Annan said on Thursday that the decision was "unfortunate".

It has also drawn denunciations from rejected countries - such as France, Russia and Germany - and from the European Union's foreign affairs chief.

But US President George Bush defended the move, saying contracts should go to countries that risked lives in Iraq.

'Divisive'

Mr Annan made his comment during a news conference in Berlin with German Chancellor Gerhard Schroeder.

I would not characterise the [US] decision as unifying Kofi Annan

"The [American] decision was unfortunate," he said, adding that it was time to "rebuild international consensus".

"I would not characterise this decision as unifying," he said.

The announcement by Washington bars opponents of the war in Iraq from bidding for American-financed Iraqi projects worth a total of $18bn.

The move was also sharply criticised by European Union External Relations Commissioner Chris Patten.

Oil contracts are among the lucrative tenders on offer

"This is a gratuitous and extremely unhelpful decision at a time when there is a general recognition of the need for the international community to work together for stability and reconstruction in Iraq," he said.

Mr Schroeder - along with Presidents Jacques Chirac of France and Vladimir Putin of Russia - raised the contracting issue during telephone calls with US President George W Bush on Wednesday.

In Canada - a country that also opposed the war - outgoing Prime Minister Jean Chretien said Mr Bush had assured him that Canadian firms would be allowed to bid for reconstruction contracts.

"He wished me good luck and thanked me for Canada's effort in Afghanistan and for the assistance to Iraq," said Mr Chretien, who retires on Friday.

Tough

In Washington, Mr Bush rejected the criticism.

GUIDE TO IRAQ RECONSTRUCTION 26 contracts worth $18.6bn, including: Water services Power generation Oil infrastructure New Iraq army equipment Full list of US contracts

"The US people understand why it makes sense for countries that risked lives to participate in the contracts in Iraq," he said.

The White House has made clear the ban was not up for reconsideration - although it has said the administration "will welcome the opportunity to talk to them and explain to them about why this decision was made".

The US Defense Department, for its part, said the move was not a punishment and the list of those eligible was not closed or fixed.

Pentagon spokesman Larry Di Rita said it was hoped more countries might consider joining the US-led coalition.

A total of 26 contracts - covering areas such as oil, power, communications and housing - are on offer to firms from the US, Iraq and countries involved in the coalition effort.