Splits over war blight efforts to fund $100bn repair operation

Having waged war to topple Saddam Hussein almost single-handed, the United States began the crucial task yesterday of organising international funding to help rebuild Iraq – despite deep opposition from many countries to the war, and its own scepticism about multilateral action.

In the first high-level gathering of the US and its main allies since the war began, John Snow, the US Treasury Secretary, began sounding out his fellow finance ministers from the G7 industrial nations at a dinner here last night for the spring meetings of the International Monetary Fund and the World Bank.

But the early signs were mixed at best. Both institutions have said they are ready to help but Horst Köhler, managing director of the IMF – which has been involved in Iraq since 1983 – said he needed "legitimacy" and a broad international consensus to act.

He appealed to bitterly divided world leaders not to let the diplomatic row which preceded the conflict to spill over into the IMF. But that could happen if France and Germany, both G7 members, insist on specific United Nations approval of any IMF and World Bank assistance.

Otherwise, the two countries fear, the Bush administration may try to present the involvement of the financial bodies as a post-facto endorsement of the war by the international community. But Ari Fleischer, the White House spokesman, declared that while "the legalities will be addressed", there was no need for an "international stamp" to start selling Iraqi oil again.

Already saddled with a projected record $300bn-plus (£190bn) budget deficit for 2003, the US must dig even deeper into its pocket to pay for the war. But the $80bn emergency spending bill, which Congress was struggling to pass yesterday, covers only six months, and provides just $5bn for reconstruction, as opposed to $62bn for purely military operations.

Unlike the 1991 war to evict Iraq from Kuwait, when the bulk of the bill was picked up by Germany, Japan and several Gulf countries, little help will be available this time. Reconstruction costs, meanwhile, are incalculable, with most estimates starting at $100bn, far beyond the ability of Iraq's oil wealth to cover, at least in the short term.

A separate hurdle is the huge debts of the former Saddam Hussein regime. Iraq is believed to owe up to $120bn to public and private lenders – including France, Germany and Russia, all opponents of the war – and faces $200bn of compensation and reparation claims, supervised by the UN.

Iraq has long been in effective default on its ordinary debt, which dwarfs its annual $60bn gross domestic product, a third lower than before the 1991 Gulf War.

With the swift and total collapse of the regime, and a power vacuum as looting and violence sweeps the country, the reconstruction issue has suddenly become very urgent.

But for all its military strength, Washington is less known for its ability to manage the aftermath of war. Complaints have already been voiced at the delay in installing retired General Jay Garner and his interim team, at least in southern Iraq, to begin the handover to a transitional authority to run the country.

But its hopes of securing help from European allies will probably hinge on the extent of the involvement of the UN, pushed aside when Britain and the US went to war. Mr Bush has said the UN will have a "vital" role but he insists Washington must retain ultimate control of rebuilding Iraq, at least in the early stages.