WASHINGTON (Reuters) - U.S. private security firm Blackwater’s deal to protect American diplomats in Baghdad will be extended for a year while the FBI investigates a 2007 incident in which the company’s guards are accused of killing 17 Iraqis, the State Department said on Friday.

A man who was wounded in a shooting attack by the security guards of Blackwater firm on Sunday, is helped by his relatives in a hospital in Baghdad, September 20, 2007. REUTERS/Ceerwan Aziz

“I have requested and received approval to have task order six -- which Blackwater has to provide personal protective services in Baghdad -- renewed ... for one year,” the head of diplomatic security, Gregory Starr, told reporters.

The September 2005 shooting incident in Baghdad enraged the Iraqi government and triggered an investigation by the U.S. Federal Bureau of Investigation into what happened and whether any crimes might have been committed.

A measure issued by the U.S.-led Coalition Provisional Authority in 2004 prevents foreign security contractors from being prosecuted in local courts. It is unclear whether they could be prosecuted under U.S. law.

After the incident, the State Department changed several elements of the contract, including tightening up rules of engagement, putting cameras on all convoys and having a diplomatic security officer ride along with the detail.

Starr said Blackwater was operating with the agreement of the Iraqi government and he did not know when the FBI’s investigation of the incident would be completed.

Asked whether the Blackwater Baghdad deal could be scrapped if the FBI investigation found wrongdoing, Starr said: “We can terminate contracts at the convenience of the government if we have to.”

“I am not going to prejudge what the FBI is going to find in their investigation. I think really, it is complex. I think that the U.S. government needs protective services,” he said.

“Essentially I think they do a very good job. The September 16th incident was a tragedy. It has to be investigated carefully,” he added.

“I am concerned (about the Iraqi response) and yet at the same time there have only been about three incidents, three escalation of force incidents, since September 16,” he said.