Extending the deployment of 20,000 troops already in Iraq for three more months alone will cost an estimated 700 million dollars, General Richard Myers, chairman of the Joint Chiefs of Staff, said.

"This is a serious situation," Myers said, who visited Iraq last week. "We're at war. We have a lot at stake against these extremists in Iraq."

Myers gave one of the most candid official assessments yet of events in Iraq, which marked a further turn away from the administration's stance that a smaller US force coupled with Iraqi security forces could secure Iraq.

He said General John Abizaid, commander of US forces in Iraq, was assessing what additional forces may be needed on top of the 135,000 American troops already there.

"Some of that will have to do with how we handle ourselves in Fallujah," Myers told the House of Representatives Armed Services Committee. "If more forces are required, we have forces identified."

If Abizaid asks for more, the Defense Department will have to send units back to Iraq sooner than promised, Myers said.

"They will certainly go over ready and well equipped, but they may not have had as much time at home as we were hoping to provide them," he said.

The Pentagon also was considering whether to send tanks and other heavy armor that the 1st Cavalry Division, which is now in the Baghdad area, had left in Texas, he said.

The US Army already has most of its 10 combat divisions either in Iraq or committed to other overseas engagements.

The others are resting from deployments to Iraq and overhauling and repairing combat equipment.

"We are going to have to dig very deep if we have to add more (troops)," Deputy Defense Secretary Paul Wolfowitz said.

Spain, Honduras and the Dominican Republic have announced they are withdrawing their troops from Iraq, and US officials have said it was unlikely other allies will put up additional forces as long as the fighting rages.

Troops from the 1st Armored Division, which have been held back in Iraq, will be used to fill the gap left by Spain's withdrawal, Myers said.

"It's a real concern and it has caused us, as I think General Myers said earlier, to readjust how we deploy our forces," Wolfowitz said of the Spanish withdrawal.

"Most of our allies are sticking with us, but this is very tough duty. It's not peacekeeping," he said.

Wolfowitz and Myers described the standoff against Iraqi insurgents in Fallujah as a key test.

The general said Sunnis had been inflamed by "outright lies" by media outlets such as al-Jazeera, the Arab satellite channel, and others were watching to see how the situation develops.

In going after those who killed and mutilated four American contractors in Fallujah on March 31, US forces also were "trying to make sure we don't lose the consent of the Iraqi people, and importantly also the Sunni and Shia populations," Myers said

"In the end we will do militarily what we will have to do. And I will just assure you of that," he said. "But in the meantime, it is a careful balance, and it is a tightrope that has been walked by some great marines."

Wolfowitz was pressed by Republicans and Democrats to request additional funding for operations in Iraq.

Representative John Spratt, a Democrat, said the military budget was "totally out of synch with reality." He estimated the additional funding needs at at least 50 billion dollars in 2004.

Representative Curt Weldon, a Republican, said the army had six billion dollars in unfunded requirements.

The Pentagon's civilian leadership has said it does not plan to ask for additional funding until late this year or early next year. A presidential election will be held November 2.

Wolfowitz said the Pentagon was reviewing the cost, but he requested only greater leeway in moving funds from less urgent programs to Iraq.

He said the military was spending money about 4.7 billion dollars a month in Iraq.

"The increased operations tempo, keeping what's going to turn out to be a force of 20,000 that includes the 1st Armored Division additional time in Iraq, is going to cost us more money. No doubt about that," Myers said.

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