Key Iraqi Leaders Deliver Setbacks to U.S.

Supporters of anti-American Shiite cleric Moqtada al-Sadr protest in Baghdad against a U.S-Iraqi security pact. (By Karim Kadim -- Associated Press)

Maliki also raised an issue that is of deep concern to Congress, saying that Baghdad expected a firm U.S. commitment to protect Iraq from foreign aggression. Although that promise was made in an outline of the strategic framework signed by Maliki and Bush in November, the administration has since assured U.S. lawmakers that it is a "nonbinding" agreement that does not require congressional ratification.

In addition to ending the U.N. mandate, Maliki said, "what we wish is . . . that if Iraq is subject to a foreign aggression it would be defended. And on the American side that was abandoned as well. So we reached a clear point of disagreement."

Top U.S. officials have said they still expect the agreements to be concluded by the end of July, but Maliki said he was "astonished by those who are talking about how close the agreement is to be signed," he said.

In an indication of the conflicting pressures on Maliki's government and the differing audiences it must appeal to, Zebari told the United Nations on Friday that Iraq was not yet capable of defending itself and that he was optimistic about the talks.

"There is bound to be statement, counterstatements, positions and so on," the Iraqi foreign minister told reporters after speaking to the Security Council. "This may be part of the negotiating tactic also. I'm hopeful . . . because Iraq does need, you see, this agreement."

Senior Iraqi officials have indicated that if there is no agreement, Iraq may ask the United Nations to extend its current mandate beyond the end of the year. A text of Zebari's prepared remarks to the Security Council, provided by the Iraqi U.N. mission, included a call to "end [the U.N. presence] in our country" and a "call upon the international community to free Iraq" from U.N. control. Lines were drawn through those phrases, and they were left out of Zebari's statement as delivered. The expiration of the U.N. mandate, in force since May 2003, poses problems for Iraq beyond the security situation. U.N. resolutions -- and an executive order by President Bush -- protect Iraqi government funds from international legal claims dating from the Saddam Hussein era.

More than $30 billion in Iraqi Central Bank reserves are held in the Federal Reserve Bank of New York. The bank also houses the Development Fund for Iraq, through which all of Iraq's oil revenue is funneled before it can be spent by the government. The fund was established in 2003 by the U.S. occupation authority and later taken over by the Iraqi government under the oversight of the United Nations, World Bank and International Monetary Fund. Its balance fluctuates and is currently about $20 billion.

The fund ensures that a portion of Iraqi funds are paid as compensation to Kuwait for Hussein's 1990 invasion of that country, under a mechanism set up before the 2003 invasion, and that Iraqi money is spent for the Iraqi people and reconstruction.

U.S. officials have denied reports that the administration has threatened to use the Iraqi money to pressure the Iraqi government. "At no time have we suggested that our interest in preserving Iraqi funds from attachment or other action within the U.S. . . . would be a lever or issue" in the negotiations, a senior U.S. official said.

The Iraqis, another U.S. official said, "have been slow" to set up an alternative arrangement for their funds and risk legal claims against them without U.N. protection. "Our advice [to Baghdad] has been to get some really good lawyers," the official said.

DeYoung reported from Washington. Staff writer Colum Lynch at the United Nations and special correspondents Saad al-Izzi and Dalya Hassan in Baghdad and Saad Sarhan in Najaf contributed to this report.