Hamid Karzai forced to back down over expulsion of mercenary companies, with many likely to remain in country

Blackwater looks set to survive an Afghan government clampdown on mercenaries after Hamid Karzai was forced by his western partners to abandon a complete disbandment of private security companies.

Under plans to be announced by the Afghan government this month many security contractors, whom Karzai regards as being little better than militias, will be allowed to continue operating for another year.

As part of a complex new transition strategy the government is giving them until 21 March 2012 before most security for development projects is taken over by the Afghan Public Protection Force. The APPF is a government security service intended to assume control over the country's hugely lucrative commercial security industry, which employs around 30,000 guards.

Western and Afghan officials say the draft plans drawn up by former Karzai opponent Ashraf Ghani will actually allow companies to keep supplying private guards and security services to development projects indefinitely. According to a list seen by The Guardian 11 companies operating in Afghanistan that have a good reputation with government officials will enjoy favoured status in taking over contracts.

Xe Services, formerly known as Blackwater, is included in that group despite being banned in Iraq and notorious for its activities in Afghanistan.

Seven companies deemed too closely linked to senior Afghan officials have been sent orders to disband within 90 days. They include NCL, which is owned by the son of the defence minister and has interests in a $2.2bn US government transport contract.

Another company, Watan, is frantically trying to win a stay of execution by arguing that its owners, the Popal brothers, are not as closely related to the Karzai family as widely believed.

Karzai had previously described the companies as "thieves by day, terrorists by night". Last August he wanted them all disbanded by the end of 2010. That decree sparked months of chaos and acrimonious wrangling between Karzai and his overseas allies. The foreign ministry refused to issue new visas to foreign guards.

"Karzai is doing what the Americans are telling him to do because he has no choice," said a senior western diplomat. "But if he thought in terms longer than just the next 24 hours he would not have got himself into this mess."

Karzai is said to be unhappy with parts of the new plan. He must give it his assent before it is due to come into effect on 21 March, the Afghan new year.

David Petraeus, the top US commander in Afghanistan, has helped to put pressure on Karzai. Afghan officials are acutely aware that without a bridging agreement billions of US aid dollars could be threatened by the general's forthcoming testimony to the US Congress on the security situation in Afghanistan.

Karzai had already conceded that embassies and Nato, which rely on private guards to protect supply convoys, could continue to use security companies. But questions remained over development projects, such as road construction, that the US regard as essential for winning over ordinary Afghans.

Under the new plan companies guarding reconstruction projects will be able to have 500 of their own guards, or up to 1,000 if they pay a one-off fine.

For contracts requiring more than that the companies will be expected to recruit, train, arm and pay new APPF guards who will then take control of the contract after 12 months.

If the APPF proves not up to the job the private company will continue to be in control, according to the draft proposal. Many officials think that is likely.

"Building up Afghan capacity so that it is big enough, is clean and not corrupt is a huge task that I think could take at least two years," said General Manan Farahi, a senior adviser to the country's interior minister who has been closely involved in the issue.

Kabul's expatriate security contractors will be able to reinvent themselves as consultants to the APPF. "There's no incentive in it for the companies who are being asked to train up these guards and then just hand them all over with all their equipment," said a manager for a large security company.

"But most of us will keep our jobs as consultants and be simply rehired ... Most of my clients want to see an expat to keep an eye on things."

Blackwater's clean slate

Eyebrows were raised among Kabul's security contractors when it emerged this month that one of the most notorious companies in the industry was deemed free of any offences.

Out of 52 companies on a list of security providers drawn up by the Afghan government Blackwater, or Xe Services as the US company is now known, was among nine considered to be in good standing.That is despite a 2009 incident when two allegedly drunk employees working for a subsidiary company killed two Afghans after opening fire on their car.

Most of the other companies scrutinised by officials were deemed guilty of considerably less serious crimes, including possession of unregistered guns, having too many guards and tax violations that they will have to rectify in order to keep operating.

A US Senate inquiry has found that the Blackwater subsidiary, called Paravant, illegally signed out 500 machine guns from a US military store under the name Eric Cartman, the South Park character.

In September a US court declared a mistrial in the case of the two contractors involved in the 2009 Kabul shooting. A jury considering claims that the men were acting in self-defence was unable to reach a unanimous verdict.

That the CIA-connected company remains welcome in Afghanistan, where it works on huge contracts to train up the Afghan security forces, is in sharp contrast to Iraq. The Iraqi government refused to renew its operating licence after Blackwater contractors were involved in a notorious 2007 shootout that let 17 civilians dead. It prompted the company to change its name to Xe Services.