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The United States is leaning toward reversing policy and allowing French firms to bid for prime contracts on some of $18.6 billion in reconstruction projects for Iraq, U.S. officials said on Thursday.

The Bush administration was also considering allowing all countries to bid on the next round of contracts, one official said, a move that would totally abandon U.S. President Bush's previous stand that only nations whose troops risked their lives in Iraq with American soldiers would be eligible.

U.S. officials, who asked not to be named, said they did not expect a decision or announcement about French firms for several weeks, adding that something could derail the emerging consensus within the administration.

Bush announced on Tuesday that Canadian firms would be allowed to bid on the contracts and administration officials have since said others, including companies from Germany and Russia, which like France opposed the Iraq war, could also be included.

"I've heard people backpedaling all over the government on this," said one official of the expected decision to include French companies. "We've got time. We've basically got a couple of weeks before the next round of tenders go out."

Bush effectively punished war opponents like Canada, France, Germany and Russia a month ago by banning them from bidding on the lucrative reconstruction projects. He said he was restricting contract bids to countries that risked lives in Iraq and "that's what the U.S. taxpayers expect."

U.S. officials have since privately acknowledged that the decision to bar some countries from the contracts was a public relations disaster and a self-inflicted wound and they have been looking for a way to repair the diplomatic damage.

The contracts controversy exploded just as presidential envoy James Baker was departing on a mission to gain European support for forgiving some of Iraq's $120 billion in foreign debt. France and Germany pledged substantial debt relief.

The shift on Canada followed an acknowledgment by U.S. officials that they wanted to put the bitter Iraq war debate behind them and patch up relations with allies who had opposed the U.S. decision to invade Iraq and topple Saddam Hussein.

One U.S. official said it would make sense to allow all nations to bid on the next round of contracts tendered under the $18.6 billion in U.S. funded projects, finally laying the controversy to rest.

A decision to allow some to bid in the next round but not others risked prolonging the irritation among other nations.

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