The State Department said Friday it will not renew Blackwater's contract to protect American diplomats in Iraq when it expires in May. A department spokeswoman said the contract will lapse because of the Iraqi government's decision to deny Blackwater a license to operate, amid lingering outrage over a 2007 shooting incident in Baghdad that left 17 Iraqi civilians dead.
Renewing Blackwater's contract was "a moot point because they were not going to be allowed to operate in Iraq anyway," says a senior department official. Blackwater executives say the company could leave Iraq within 72 hours of being told to do so, but they caution such a move would cause more harm to the diplomats it protects than to the company. (Read more Blackwater stories.)