Instead it will bring together smaller working groups of Iraqi experts to talks on subjects such as reviving the Iraqi economy and restoring the public health and education systems, a State Department official said on Wednesday.

"We have decided to postpone the conference. We are planning working groups of Iraqi experts... This would be the conference," said the official, who asked not to be named.

The State Department had asked Congress for $5 million for the Middle East Institute, a Washington-based nongovernmental organization, to organize the big conference in May at a European venue which was never decided.

But unidentified members of Congress used their authority to put a hold on the money, apparently because the conference would sideline the Iraqi National Congress (INC), the largest Iraqi opposition movement, officials said.

Sen. Jesse Helms, the conservative North Carolina Republican, had asked the State Department to give the INC all of the money appropriated for helping the Iraqi opposition.

Supporters of the INC helped to scotch the State Department's plans by publicizing remarks critical of President Bush's policy by the president of the Middle East Institute, former assistant secretary of state Edward Walker, sources close to the Iraqi opposition said.

After Bush said in January that Iran, Iraq and North Korea made up an "axis of evil," Walker said, "We have complete apples and oranges here. To call them an axis is ridiculous." 

TACTICAL SUCCESS FOR INC

The decision to postpone the conference is a tactical success for the INC, which favors its own conference of former Iraqi military officers dedicated to preparing plans to overthrow the Iraqi government.

The Bush administration is sharply divided over the value of the INC. Some see it as incompetent and irrelevant, others as a vital component in plans to achieving the administration's stated objective of getting rid of Saddam.

The State Department official said the Middle East Institute brought together a small group of Iraqis on April 9-10 to discuss the proposed conference but the institute will have at most a peripheral role in the future.

Officials at the Middle East Institute declined to discuss the conference but a source close to the institute said, "It was never scheduled and it's still under development."

One source close to the Iraqi opposition said the postponement of the conference reflected the ascendancy, possibly temporary, of those in the administration who distrust the State Department approach to Iraq and favor the more robust military strategy that the INC has long advocated.

The INC says it can play the role the Northern Alliance played in Afghanistan in 2001 when a U.S. air campaign enabled the alliance to drive the Taliban out of power.

But the INC's only forces on the ground are Kurdish fighters in the north, who have no appetite for attacking Iraqi government forces without watertight U.S. assurances.

The Kurds are skeptical of the resolve of the United States, which has let them down at least three times in the past 30 years, provoking massive Iraqi retribution.

A source close to the INC said it was confident its own conference of military officers will come off, though it too is running weeks behind the original schedule. The INC originally hoped it would take place in early April.

But analysts say the administration has put on hold its plans to overthrow Saddam because of its preoccupation with the conflict between Israelis and Palestinians.