What exactly was the Iraqi government hoping to accomplish by banning Blackwater? A few thoughts:
(1) This was a symbolic gesture for domestic political consumption; the Iraqi public is outraged by a foreign occupation, and passing this legislation is a relative inexpensive way of signaling nationalist resistance: that Blackwater is a small part of the PMC landscape lends credence to this notion, which I think reflects the conventional wisdom.
(2) Because PMCs are such a central part of the US presence, undermining them is a way of undermining said presence -- and this in turn furthers the goal of a Shia leadership that sincerely believes it can successfully vanquish the Sunni minority through sheer ruthlessness.
(3) Chris Hayes sees the Blackwater imbroglio as further proof that "Iraq is an imperial project." And that's clearly true in a sense. Similarly, the US occupation of Germany and Japan and Austria (radically different for all of the obvious reasons) saw to it that any armed resistance was crushed, co-opted, or otherwise contain to maintain suzerainty. Indeed, the imperialist component of American influence was in fact greater during the Cold War according to the very smart Nexon-Wright analysis (which I found via M.Y.).
Clearly we're in a strange and different situation in which the United States is in a very antagonistic relationship with its supposed "client state," the Shia-dominated Iraqi semi-state. Banning Blackwater would undermine the ability of US forces to continue as the dominant military presence in Iraq (see 2), so it's hardly shocking that the Iraqi government would press for such a step. So Chris is right: the US presence has to be justified by something more than, "Hey man, we're just here to support a fledgling democracy." But of course the rationale for the US presence has long since moved past that point to, "We need to contain the chaos and tamp down the violence." That's where the argument is happening now, and that's where there are very convincing arguments (in my view) on both sides.
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