European leaders continued to show dismay Thursday towards the Pentagon's barring of opponents of the Iraq war from bidding on reconstruction contracts, hinting that the move could hinder U.S. efforts to restructure the country's huge foreign debt.

"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," Chris Patten (search), the European Union's commissioner for international relations, said through a spokesman.

On Wednesday night, French President Jacques Chirac (search), German Chancellor Gerhard Schroeder (searchand Russian President Vladimir Putin (searchall raised the contracting issue during telephone calls with President Bush on Wednesday, the White House said.

The phone calls had been previously scheduled by the White House to discuss the possibility of the European nations forgiving their shares of Iraq's $125 billion debt, something which suddenly seemed less likely.

"Iraq's debt to the Russia Federation comes to $8 billion, and as far as the Russian government's position on this, it is not planning any kind of a write-off of that debt," Defense Minister Sergei Ivanov told reporters Wednesday. "Iraq is not a poor country."

But Germany said Thursday there was "no direct link" between debt relief and the U.S. exclusion of German companies from reconstruction contracts.

"The stabilization of Iraq is also in Germany's strategic interest," Bela Anda, Schroeder's spokesman, told The Associated Press.

President Bush is sending former Secretary of State and Treasury Secretary James A. Baker (search) abroad to lobby for restructuring and reducing Iraq's debt. Baker is expected to holds talks in Berlin before Christmas, the German government statement said.

The New York Times reported Thursday that the Pentagon's timing of the bid restriction announcement had caught the White House off guard, although the plan itself had been fully approved.

Reacting to the international outcry against the decision, the White House said Wednesday it was not up for reconsideration.

The only consolation offered to angry allies was that the Bush administration "will welcome the opportunity to talk to them and explain to them about why this decision was made," press secretary Scott McClellan said.

The White House said countries wanting a share of the $18.6 billion in reconstruction contracts in the 2004 U.S. budget must participate militarily in the postwar effort.

"These are countries that have been with us from Day One, these are countries that are contributing forces, that have been making sacrifices and that's why this decision was made," McClellan said.

McClellan pointed out that companies from anti-war countries could compete for contracts being financed by a separate international fund that the White House estimates will be worth $13 billion, and that the ban does not prevent companies from winning subcontracts.

French telecom giant Alcatel, for example, won a subcontract to carry out a third of the two-year deal awarded to Egyptian firm Orascom to build a mobile phone network in central Iraq.

Such prospects, however, did little to assuage international anger over the directive issued by Deputy Defense Secretary Paul Wolfowitz in a memo dated Friday and posted on a Pentagon Web site Tuesday.

The German newspaper Der Tagesspiegel sympathized with the U.S. position.

"It is childish to reject the war but to be offended when afterwards no profit is to be made from reconstruction," the newspaper said Thursday.

But Canada's deputy prime minister, John Manley, said the decision would make it "difficult for us to give further money for the reconstruction of Iraq." Canadian officials said the country has contributed $225 million thus far.

Paul Martin (search), who becomes Canada's prime minister Friday, said the Pentagon decision was "really very difficult to fathom" and that he would raise the issue with U.S. officials.

Germany, a leading opponent of the war, called the decision "unacceptable," and government spokesman Bela Anda said it went against "a spirit of looking to the future together and not to the past."

In Moscow, Deputy Foreign Minister Yuri Fedotov said the directive "will hardly foster the mobilization of the international community" to rebuild Iraq, "more likely the opposite," according to the ITAR-Tass news agency.

In Brussels, Arancha Gonzalez, trade spokeswoman at the European Commission, said the EU was asking the United States "to provide us with information so we can see whether or not their commitments" under the World Trade Organization "have been respected."

The Pentagon directive said restricting contract bids was necessary to protect essential security interests. WTO rules allow for exemptions based on national security.

"We suspect that in substance it contradicts the (international) principles for international tenders for public projects, although the United States in particular always calls for observing these principles," said Ludolf von Wartenberg, general manager of the Federation of German Industry.

The Associated Press contributed to this report.