After a shootout on Sunday, allegedly killing several civilians, the Iraqi government has announced that it has revoked Blackwater's license to operate in Iraq. It's unclear whether Blackwater actually had a license from the Iraqi government and it has operated there most of the time without a license--the media doesn't seem to have clued into this one yet.
The issue of BW operating in Iraq without an Iraqi government license came up in the summer regarding a contested contract award covered in the Washington Post:
Blackwater said that it obtained a one-year license in 2005 but that shifting Iraqi government policy has impeded its attempts to renew.
There is always the slight chance that BW did attempt and was able to renew the license since this June 2007 statement.
It looks like the incident happened when BW was performing the contract for State, so it will be interesting to see if the US government allows the Iraqis to put limits upon who it's contracting with--for both white and black contracts. Regardless of whatever gymnastics State goes through to appease the Iraqis, somehow I suspect that the CIA contracts are not going to be subject to Iraqi government licensing. Smart money says that Blackwater is in Iraq for the duration.