(Bernd Debusmann is a Reuters columnist. The opinions expressed are his own)

WASHINGTON (Reuters) - It was the diplomatic equivalent of showing a stiff middle finger to the Iraqi government: the U.S. Department of State’s extension of a contract with the private security firm Blackwater to protect American diplomats in Baghdad.

The contract was set to lapse on May 7 and its renewal came against the background of a pending FBI investigation into the killing of 17 Iraqi civilians by Blackwater operatives in a chaotic incident in a busy Baghdad square last September. Blackwater says its motorcade came under fire and it acted in self-defense.

In the wake of the shooting, condemned as unprovoked and indiscriminate by the Iraqis, Prime Minister Nuri al-Maliki said Blackwater should leave the country because “the abundance of evidence against it makes it unfit to stay in Iraq.” He backed down later and agreed to await the result of investigations into the killings.

The State Department extended the contract ahead of the FBI’s conclusions and this week a furious Maliki went on CNN to complain that his government had not even been consulted on the matter. Blackwater’s presence is an extremely sore point for many Iraqis who hate the high-speed, get-out-of the-way-or-die motorcades in which American officials and visiting VIPs under the company’s protection have been ferried around Baghdad.

Prior advice or consultation on an issue as sensitive as Blackwater is a reasonable expectation - Iraq officially became a sovereign nation in June 2004 and the U.S. is portraying itself as a partner rather than an occupation power. It is easy to see why Maliki, who is not held in high esteem by much of official Washington, would feel undermined and disrespected.

TRIBUTE TO BLACKWATER’S PROFESSIONALISM

The State Department’s assessment of Blackwater differs greatly from the bleak Iraqi views of the company. That comes through loud and clear in a just-published report by the Bureau of Diplomatic Security, the unit which signed the contract with Blackwater and is responsible for its activities in Iraq.

The foreword to the report is signed by Gregory Starr, acting head of the little-known bureau which has 1,450 agents scattered around the world. He succeeded Richard Griffin, so far the only bureaucratic casualty of the September 16 shooting. Griffin resigned last October in the face of sharp criticism from Congress over his handling of the affair.

The account of the Bureau’s activities last year makes no mention of the September 16 shootings but pays tribute to Blackwater’s professionalism.

“Just three weeks into 2007, Diplomatic Security suffered a tragic loss. On January 23, five of our highly valued professional security colleagues lost their lives in service to our nation.

“These brave men, employees of Blackwater...were killed when their helicopters came under attack while supporting a U.S. Embassy ground convoy traveling down a Baghdad street.

“Their daily duty entailed sacrifice, service, commitment, and danger. They now take their place among the 33 private security professionals who have lost their lives protecting the State Department since 2003. These men understood the enormous risk in their mission. But they put the safety and security of others above their own.”

The U.S. officials traveling in the convoy escaped unharmed. Blackwater’s CEO, Erik Prince, has often stressed that no U.S. official under his company’s protection has been killed or wounded. “Success 100 percent of the time” in his words.

JUSTICE SYSTEM

Along with the rest of the globe-spanning private security industry, Blackwater executives resent the widespread popular image of private military contractors as trigger-happy mercenaries driven by greed and adrenaline, accountable to no one and overseen by nobody.

Such perceptions have been nourished by a series of incidents, including a much-publicized case involving the bodyguard of Iraqi Vice President Adel Abdul-Mahdi, Raheem Khalif. He was shot dead by a drunken Blackwater contractor on Christmas Eve, 2006. The contractor was fired and whisked home to the U.S. but never charged with a crime.

Blackwater and other security companies in Iraq have operated in a legal fog. They were exempted from Iraq’s fledgling judicial system under the infamous Coalition Provisional Authority order number 17, decreed just before the U.S. handed over sovereignty.

“Contractors shall be immune from Iraqi legal process with respects to acts performed pursuant to the terms and conditions of a contract...” it said.

Private security contractors in Iraq outnumber U.S. military personnel - 180,000 to 160,000 - but in five years of war, not a single contractor has been charged with a crime involving Iraqi civilians. In contrast, there have been more than 60 courts martial of U.S. soldiers.

That skewed picture is supposed to change with new legislation, including a 2006 amendment to the Uniform Code of Military Justice, which allows civilian contractors to be tried by military courts. Will that be used to cover cases like the Baghdad square shooting?

Possibly. But there is reason to be skeptical. The first person to face criminal charges since the amendment passed (and the first such prosecution since the Vietnam war) involves an Iraqi-born translator, Alaa Mohammed Ali, who is accused of having stabbed another contractor. He is scheduled to have his first pre-trial hearing this week.

It is a case of the U.S. military trying a non-American civilian for assaulting another non-American. Whether that will be followed by a military court trying an American civilian for killing Iraqi civilians remains to be seen.

(You can contact the author at Debusmann@Reuters.com)