A lot of international feathers have been ruffled since the United States announced in a tersely worded message this week that only allies who helped in the Iraq war (search) will be permitted to bid on primary Iraqi reconstruction contracts. 

But in his first public comments on the subject, President Bush stood firm Thursday, and left little room for compromise on $18 billion in U.S.-financed Iraq reconstruction aid.

"Men and women from our country, who proudly wear our uniform, risked their lives to free Iraq. Men and women from other countries, in a broad coalition, risked their lives to free Iraq. And the expenditure of U.S. dollars will reflect the fact that U.S. troops and other troops risked their life," Bush said at a year-end Cabinet meeting.

He added that Americans strongly support his stance.

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

Countries that have contributed troops include the United Kingdom (search), Spain (search), Italy, Poland, Japan and Australia (search). Countries that would be excluded under the Pentagon directive include Russia, France (search), Germany and Canada, all of whom opposed the war. 

Deputy Defense Secretary Paul Wolfowitz defended the U.S. decision, adding that the tough stance will encourage countries to join the coalition and make them think twice about saying no to such operations in the future.

But government officials say privately that the president is more flexible than he seems. As Bush spoke, former Secretary of State James Baker prepared to go to Europe to ask the Germans, Russians and French to forgive the $20 billion in loans they had extended to deposed Iraqi President Saddam Hussein. He is also headed to the United Kingdom and Italy during what officials described as a "fact-finding mission."

White House press secretary Scott McClellan seemed to indicate that a possible deal could be arranged.

"I'm saying that we welcome the opportunity to discuss this decision with other countries, that if other countries want to participate in the ongoing efforts, then circumstances can change," McClellan said.

Pamela Wallin, Canada's consul general to New York, also told Fox News that Canadian Prime Minister Jean Chretien received a phone call from Bush on Thursday offering assurances that Canada will not be excluded from the prohibition.

"That's what our prime minister said, that he'd been given assurances," Wallin said, adding that the United States does not have control over all the money because several funds are administered internationally.

Canada may be an exception because it has been a strong supporter in the war on terrorism and still has troops in Afghanistan. McClellan refused to discuss that situation, saying the president called Chretien on his last day in office to wish him luck. Paul Martin takes over the position on Friday, and has said he would raise the issue with U.S. officials.

"Like [Bush] said to other leaders, there'll be open lines of communication on this, we'll be glad to discuss these issues with you, and that's where it was left," McClellan said.

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

The British government said Washington was fully entitled to limit construction contracts to countries that were part of the U.S.-led coalition, but foreign leaders said they were taken by surprise by the decision.

Russia's foreign minister suggested the contract ban could undermine the international campaign against terrorism.

"The activities in Iraq split the international community and reduced its possibilities in the fight against international terrorism," Igor Ivanov said at a news conference in Munich.

United Nations Secretary-General Kofi Annan, in Germany meeting with Chancellor Gerhard Schroeder, said it's time for more international cooperation, not less.

"I believe it is time we tried to rebuild international consensus and work together and pool our efforts as the chancellor said, to stabilize Iraq," Annan said.

Schroeder added that he didn't know if such a prohibition violates international trade law, a consideration the European Commission said it would look into. Bush shrugged off the complaint.

"International law? I better call my lawyer; he didn't bring that up to me," Bush said.

Bush added that Schroeder had not voiced a complaint during the phone call between the two leaders on Wednesday. The president also spoke Wednesday with French President Jacques Chirac and Russian President Vladimir Putin.

Schroeder said "no direct link" exists between the country's willingness to forgive Iraq's debt and the U.S. ban on contracting, but Russia signaled it would take a hard line on restructuring after being excluded from contracts.

"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. "Iraq is not a poor country."

McClellan said Bush feels that Iraqis should not be stuck with the bill for the palaces and torture chambers of Saddam's regime. Trying to focus attention on the debt-relief issue Thursday, Bush said forgiving Iraq's debt "would be a significant contribution for which we would be very grateful."

As the international stir continues, the United States postponed a conference that was to have taken place Thursday for companies seeking reconstruction contracts in Iraq. The conference, at which the contract requests were to have been made public, is now scheduled for Dec. 19 outside Washington, D.C. The delay was blamed on scheduling conflicts.

Fox News' Wendell Goler, Greg Kelly and The Associated Press contributed to this report.