Blackwater is one of three private security firms charged with protecting diplomats and other reconstruction workers in Iraq.

The Iraqi government urged the State Department to sever ties with North Carolina-based Blackwater after some of its guards killed17 people, including women and children, last September.

"This is bad news," Maliki adviser Sami al-Askari told CNN Saturday. "I personally am not happy with this, especially because they have committed acts of aggression, killed Iraqis, and this has not been resolved yet positively for families of victims."

The Iraqi government might contest Blackwater's contract renewal, al-Askari said.

"The U.S. government has the right to choose what contractors it chooses, but Iraq should also have the right to allow or ban certain contractors from operating on its territory," he said.

Another Maliki adviser, Sadeq al-Rikabi, said the Blackwater contract would be essentially temporary since the United Nations mandate under which the U.S. government operates in Iraq will expire at the end of 2008and be replaced by a bilateral agreement now under negotiation.