IMPEACH BUSH

BAGHDAD, June 13 -- The Bush administration's Iraq policy suffered two major setbacks Friday when Prime Minister Nouri al-Maliki publicly rejected key U.S. terms for an ongoing military presence and anti-American Shiite cleric Moqtada al-Sadr called for a new militia offensive against U.S. forces.

During a visit to Jordan, Maliki said negotiations over initial U.S. proposals for bilateral political and military agreements had "reached a dead end." While he said talks would continue, his comments fueled doubts that the pacts could be reached this year, before the Dec. 31 expiration of a United Nations mandate sanctioning the U.S. role in Iraq.

The moves by two of Iraq's most powerful Shiite leaders underscore how the presence of U.S. troops has become a central issue for Iraqi politicians as they position themselves for provincial elections later this year. Iraqis across the political spectrum have grown intolerant of the U.S. presence, but the dominant Shiite parties -- including Maliki's Dawa party -- are especially fearful of an electoral challenge from new, grass-roots groups.

"All the politicians are trying to prove that they care more about Iraqis than they do about Americans -- otherwise they know the people and the voters will not support them," said Ala Maaki, a senior lawmaker with Iraqi's largest Sunni political party. "I think we could see al-Maliki and Moqtada Sadr trying to one-up the other today and see who can take the strongest stand against the Americans."

As the controversy over U.S. troops grew in the region, Foreign Minister Hoshyar Zebari scheduled the first high-level Iraqi government contacts with the two U.S. presidential contenders. Zebari will meet privately Sunday with Sen. John McCain (R-Ariz.) -- who supports administration policy -- and hold a telephone conference Monday with Sen. Barack Obama (D-Ill.), who has said he would withdraw U.S. combat troops from Iraq.

Maliki's comments came as Sadr called for a new armed wing of his Mahdi Army militia to fight U.S. troops. Sadr had ordered the militia to cease carrying weapons last August -- a leading factor in the recent decline in violence -- although U.S. military officials have asserted that renegade militia units have continued the fight under instructions from Iran.

Sadr aides, some of whom appeared surprised by the cleric's announcement, said he wanted to issue the order now to avoid seeming as if he was responding to a U.S.-Iraqi agreement if one is reached by the July deadline.

Salah al-Obaidi, Sadr's chief spokesman, said the order was essentially a full-scale reorganization of the Mahdi Army, transforming it from a militia into a permanent peaceful organization with a small armed wing of several hundred or so members. He said the cease-fire for the rest of the movement would remain in force.

The new group, Sadr's statement said, would operate in "total secrecy" and attack only American forces. "The resistance will be restricted to a group authorized by a written letter from us soon," it said. "Arms will be restricted to them and they may only point them towards the occupier."

Bilateral negotiations began in March over two U.S.-drafted accords: a status-of-forces agreement, or SOFA, governing legal protections and responsibilities of U.S. troops, and a "strategic framework" of the overall U.S.-Iraq political and military relationship. Iraq has rejected allowing unilateral U.S. authority to conduct military operations and control nearly 60 bases, and to arrest and detain Iraqi citizens. Other provisions would have given the United States control over Iraqi airspace and borders and granted immunity to U.S. troops and civilian security contractors from Iraqi laws and prosecution.

Bush administration negotiators have since revised some of the provisions of the SOFA, agreeing to high-level coordination of military and arrest operations, fine-tuning the extent of U.S. operational control of airspace and borders, and proposing that immunity for contractors be granted only for actions taken during official U.S. operations.

Speaking to reporters in Amman, Jordan's capital, Maliki indicated that the proposed compromise on immunity for contractors was insufficient. "We could not give amnesty to a soldier carrying arms on our ground," he said. "We will never give it."

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.