WASHINGTON  - The crown prince of Abu Dhabi has hired the founder of private security firm Blackwater Worldwide to set up an 800-member battalion of foreign troops for the United Arab Emirates, The New York Times reported on Sunday.

The Times said it obtained documents that showed the unit being formed by Erik Prince's new company Reflex Responses with $529 million from the UAE would be used to thwart internal revolt, conduct special operations and defend oil pipelines and skyscrapers from attack.

The newspaper said the decision to hire the contingent of foreign troops was taken before a wave of popular unrest spread across the Arab world in recent months, including to the UAE's Gulf neighbours Bahrain, Oman and Saudi Arabia.

The UAE itself has seen no serious unrest. Most of its population is made up of foreign workers.

Blackwater, which once had lucrative contracts to protect U.S. officials in Iraq, became notorious in the region in 2007 when its guards opened fire in Baghdad traffic, killing at least 14 people in what the Iraqi government called a "massacre".

One former Blackwater guard pleaded guilty to manslaughter charges in those killings, and a U.S. court reinstated charges against five others last month. Prince has since sold the firm, which changed its name to Xe. The firm denies wrongdoing.

The newspaper said the Emirates, a close ally of the United States, had some support in Washington for Prince's new project, although it was not clear if it had official U.S. approval.

Two UAE government officials contacted by Reuters declined immediate comment on the New York Times report, and the U.S. embassy in the UAE also had no immediate comment. It was not possible to locate Prince for comment.

The Times quoted a U.S. official who was aware of the programme as saying: "The Gulf countries, and the U.A.E. in particular, don't have a lot of military experience. It would make sense if they looked outside their borders for help."

State Department spokesman Mark Toner told The Times the department was investigating to see if the project broke any U.S. laws. U.S. law requires a licence for American citizens to train foreign troops.

Toner also pointed out that Blackwater, now known as Xe Services, had paid $42 million in fines in 2010 for training foreign forces in Jordan without a licence, the Times said.

According to former employees of the project and U.S. officials cited by the Times, the troops were brought to a training camp in the UAE from Colombia, South Africa and other countries, starting in the summer of 2010.

They were being trained by retired U.S. military, and former members of German and British special operations units and the French Foreign Legion, the Times said.

Prince had insisted the force hire no Muslims, because they "could not be counted on to kill fellow Muslims", the paper said.

Former employees also told the newspaper the Emirates hoped the force could be used to counter any threat from Iran, which the Arab states in the Gulf consider a foe.

Although The Times said the documents it obtained did not mention Erik Prince, former employees had told the newspaper he had negotiated the contract with Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan.

Emiriati officials had proposed expanding the force to a brigade of several thousand if the first battalion was successful, the newspaper said.