Blackwater's Days in Iraq Might be Numbered

December 19, 2008— -- The controversial security firm Blackwater may have to cease its operations in Iraq come Jan. 1, 2009. Despite four separate federal grand jury investigations of its operations, Blackwater has continued to provide security services for the U.S. State Department.

But now the department is exploring contingency plans in the event the Iraqi government denies Blackwater the ability to work in Iraq beginning Jan. 1, when only licensed security contractors will be allowed to operate in Iraq. Blackwater has never had a license to operate there.

Ultimately, the State Department has plans to replace all of its private security contractors with a new security force to protect its diplomats in both Iraq and Afghanistan. The effort to hire and train this large a force could take years to accomplish.

Numerous officials tell ABCNews.com that the State Department has approved a long-term contingency plan to hire as many as 800 security personnel to ultimately replace its private security contractors. These "Security Protection Specialists" would receive limited immunity because they would be State Department employees. They will not be considered Diplomatic Security agents because they will not have arrest powers and will not be investigators.

Initially, 50 people will be hired as Security Protection Specialists to run the security details and provide convoy protection, but that number could rise to as many as 800 as they replace all contractor personnel in the coming years.

ABCNews.com has learned that until this force becomes a reailty, the State Department has developed contingency plans that could mean that many ex-Blackwater contractors currently in Iraq could be absorbed into Dyncorps and Triple Canopy, the two other private security companies working for the State Department. This arrangement would fill the gap until the Department hires and trains its new force of Security Protection Specialists who would work in Iraq and Afghanistan.

Blackwater's contract expires next year, but it could effectively cease their operations in January because, unlike its competitors, the company has always operated in Iraq without a license. The new Strategic Forces Agreement with Iraq mandates that, as of Jan. 1, only security contractors with a license will be allowed to operate in Iraq.