Washington  - The US State Department is extending its Iraq contract with Blackwater security firm, the diplomatic protection service which is still under investigation for killing 17 Iraqi civilians last year.

Gregory Starr, acting assistant secretary of state for diplomatic security, told reporters Friday that security needs dictated renewal of the contract, which was due to expire next month.

The September 16, 2007, shooting, in which Blackwater guards opened fire in a Baghdad neighbourhood, provoked the Iraqi government to anger and sparked an uproar about the use of private guards in Iraq.

"The September 16 incident was a tragedy, it's got to be investigated carefully," Starr said. "The results of that will come out eventually and then we will make the decision on how to proceed."

Starr conceded he was "concerned" about the signal the extension could send to the Iraqi people, but he said he was also confident that new rules of engagement for Blackwater put into place after the incident had calmed down the situation.

"I'm ... very pleased at at the level of effort" Blackwater is putting in to "resolve any issues," Starr said.

Blackwater guards provide security for US diplomats in Baghdad. The firm has a five-year contract, with one base year and options on the four following years. With the extension, the contract is entering its fourth year.

Blackwater maintained that the diplomatic convoy it was protecting came under fire from armed militants, an account strongly disputed by the Iraqi government.

It remains unclear whether the guards involved in the shooting can be prosecuted under US law, but the incident is still being investigated.

Starr said that if the FBI determined that the Blackwater guards were criminally liable for the shootings, the state department could terminate the contract. (dpa)