President George W. Bush clashed again with Congress over the Iraq war Friday, rejecting a US military spending bill on the grounds it would throw up legal obstacles to reconstruction money.

“The aggregate financial impact of these provisions on Iraq would be devastating,” Bush said in a memo released by the White House, outlining his reasons for rejecting the 2008 National Defense Authorization Act (NDAA).

The bill “would imperil billions of dollars of Iraqi assets at a crucial juncture in that nation’s reconstruction efforts and … would undermine the foreign policy and commercial interests of the United States,” he said.

Bush said he was withholding approval of the bill — effectively vetoing it, since the law cannot pass if he does not sign it within 10 days of it being presented to him.

A key provision of the bill would expose the Iraqi government to “massive” demands for compensation from victims of Saddam Hussein’s regime, deputy White House spokesman Scott Stanzel said.

The administration believes Iraqi funds in the United States would be frozen when a claim was filed, blocking money desperately needed for Iraq’s reconstruction.

“The new democratic government of Iraq, during this crucial period of reconstruction, cannot afford to have its funds entangled in such lawsuits in the United States,” Stanzel said.

Senior administration officials who briefed reporters Friday estimated Iraqi assets in the United States at up to 30 billion dollars, not including joint US-Iraqi ventures.

Bush on Wednesday signed a different, 555 billion dollar catch-all budget bill for 2008 that includes 70 billion dollars for the Iraq and Afghanistan wars without any timeline for troop withdrawal.

Majority Democrats in Congress had unsuccessfully pushed to hold back the money for Iraq in that bill, in a bid to make Bush commit to withdraw US forces from the violence-wracked country.

The NDAA is an annual bill that allocates how funding granted in separate legislation is to be spent.

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