Marking a gradual but dramatic shift in policy, the US appears prepared to release a major figure it accuses of masterminding the killing of five American soldiers in one of the most carefully planned insurgent attacks of this war, according to Iraqi and US officials.
Sheikh Laith al-Khazali, a senior member of a Shiite extremist group that the Iraqi government is trying to bring into the political process, was released from US custody over the weekend in what the Iraqi government called a wider reconciliation effort with extremist groups.
The release of his brother Qais al-Khazali, who heads the Iranian-backed militant group Asa'ib al-Haq and is directly linked to a lethal attack in Karbala in 2007, is expected to follow as talks progress, according to US and Iraqi officials. The officials asked not to be identified due to the sensitivity of the issue.
Freeing the two men, along with a Lebanese Hezbollah operative arrested by US forces at the same time in Basra two years ago, is also linked to the release of British hostages who have been held by Shiite extremists for the past two years.
"This isn't about freeing the hostages, it's about getting Asa'ib al-Haq to stop its attacks," says one senior American official, regarding the US motivation in releasing the Khazali brothers.
As US forces pull out of Iraqi cities and eventually out of the country, reconciling active insurgent factions is seen as crucial to keeping security gains from unraveling.
The US military has said the group, whose name translates as League of the Righteous, is directed by the Quds force of Iran's Revolutionary Guards. They have accused Qais al-Khazali of orchestrating a dozen other attacks, most of them on British targets in the south of Iraq.
In the raid on the Karbala provincial joint coordination center in January 2007, Iraqi gunmen posing as US soldiers killed an American soldier in a grenade attack and abducted four others whom they later shot.
Iraq won't punish militants for attacks on Americans
The issue highlights the stark gap between Iraq and the US regarding the consequences of attacks on American targets.
Mr. Sa'ady, who heads the Prime Ministry Implementation and Follow Up Committee for National Reconciliation, says unless Qais al-Khazali were wanted for crimes against Iraqis, they would have no reason to keep him in detention.
"In principle we are ready to forgive anyone who lays down their arms," he says.
The release of the three has been a central demand of Shiite extremists who kidnapped five British hostages from the Iraqi Finance Ministry two years ago.
The British government has been working intently on the release of their citizens – a computer trainer and four employees of a Montreal-based security firm who were abducted by gunmen wearing Iraqi police uniforms.
Four of the hostages are thought to be still alive. The hostage-taking was believed to be in retaliation for the arrest two months earlier of the Asa'ib al-Haq leaders.
British officials are quick to say that Laith al-Khazali's release from US custody was not part of a hostage deal, but believe it could pave the way for the Britons to be freed.
While Iraqi officials say privately they believe that one of the British captives could be freed soon, neither Qais al-Khazali's release nor the freeing of remaining hostages is expected to be imminent.
A sign of lower US expectations
For the US, like much in this war, the expected release of an Iranian-backed insurgent linked to US deaths marks the scaled-down expectations and increasing recognition of a much more complex reality on the ground than the United States had bargained for here.
Before becoming a political player, Mr. Sadr, a Shiite cleric, declared war on US troops here, launching the biggest challenge to American forces since the invasion. US officials went from declaring they were intent on "capturing or killing" him to welcoming him into the political process after a cease-fire.
With the formation of the Sons of Iraq, the US funded almost 100,000 neighborhood fighters, many of them former insurgents, to fight Al Qaeda in Iraq. The deals struck by US military commanders included amnesty even for those who had killed US soldiers as long as they renounced violence.
Under the security agreement signed with Iraq last year, by the time it leaves in 2011, the US will hand over or release all of the 11,000 prisoners still in its custody.
Qais al-Khazali would be the highest-profile figure in US custody known to have been let go. In announcing his arrest two years ago, the US military stated that he led one of the Iranian-backed militant groups that it had declared the biggest threat to US forces, and that he had personally authorized the Karbala operation.
Qais al-Khazali had been a close aide of Sadr, but formed a breakaway faction after Sadr agreed to a cease-fire with US forces.
The third member of the group, whose release has been demanded in return for freeing the British hostages, is also still in US custody. US officials say Ali Mussa al-Daqdaq, a Lebanese Hezbollah operative, commanded a special operations group and had been sent to Iran to train Iraqi extremists.
The issue of the release is so sensitive that US military leaders seemed incapable of deciding whether to confirm they had released Laith al-Khazali.
The military indicated that a spokesman's initial confirmation of the release, which stated that the release was part of the reconciliation process, was not supposed to have been issued.
[Editor's Note: In the original version the headline overstated the case.]