BLACKWATER….Well, this should be interesting:

The Iraqi government said today it had revoked the license of Blackwater USA, a private security company that guards U.S. Embassy personnel in Iraq, following a shootout in downtown Baghdad on Sunday that left at least nine people dead.

….The Iraqi government’s position toward Blackwater set up a confrontation with the U.S. government over what legal authority governs the behavior of private security contractors here. Blackwater, which has an estimated 1,000 employees in Iraq, plays a high-profile role because it guards U.S. Ambassador Ryan Crocker and other diplomats.

….It was not immediately clear whether Iraq or the United States holds the authority to regulate Blackwater’s operations….Lawrence T. Peter, the director of the Private Security Company Association Iraq, said that Blackwater was licensed by the Interior Ministry. But Blackwater acknowledged as recently as two months ago that a license it obtained in 2005 had lapsed, and the company was having trouble getting the license renewed.

The Bush administration can’t be happy about this order. But the Maliki government is already hanging by a thread, and forcing them to back down on this after they’ve already gone public could deal them a death blow. Maybe there’s a quiet compromise of some kind available here, but it looks to me like Blackwater needs to pack its bags.