The classified intelligence report, now being circulated throughout the administration, says a senior Bosnian government official forced out of power under American pressure in November because of his close ties to Iran is setting up a secret intelligence network for Bosnian President Alija Izetbegovic.

According to U.S. sources, the report states that Hasan Cengic–fired as Bosnia’s deputy defense minister after the United States threatened to withhold $100 million in military aid to Bosnia–has taken on an unofficial but influential intelligence role on behalf of Izetbegovic, an old friend.

If the report is entirely accurate, Cengic’s powerful, unofficial intelligence role would mark a major setback in U.S. efforts to reduce or eliminate Iranian influence in Bosnia, which has remained one of the biggest strategic problems for the Clinton administration in the Balkans since the Dayton peace accords were signed in November 1995.

Cengic’s role also would serve as a reminder of President Clinton’s secret role in giving a green light in 1994 to the creation of a covert Iranian arms pipeline to Bosnia during the country’s bloody civil war. Cengic handled logistics for the shipments until they were cut off in early 1996 after the Dayton accords and the entrance into Bosnia of U.S.-led peacekeeping troops.

The administration has not yet talked to Izetbegovic about the report of Cengic’s secret role, administration sources said. Instead, a debate over the accuracy of the report is underway within the U.S. national security community, and the administration continues to insist publicly that Cengic has had no official role in the Bosnian-Croat federation government since his ouster from the Defense Ministry.

The administration had demanded that Cengic be barred from official positions in the Bosnian government’s military or intelligence agencies and those demands have been met by the Izetbegovic government, administration officials have insisted.

“We always knew he would remain influential,” said one U.S. official. “We didn’t say he couldn’t be involved in politics or other parts of the government, outside the security and intelligence arenas.”

The United States was prompted to pressure Izetbegovic to oust Cengic after it obtained hard evidence last September that he had not curtailed his relationship with Iran. That could have made it difficult for Clinton to defend his decision last June to certify that Bosnia had severed its military and intelligence ties to Iran. Clinton’s certification had been required by Congress before U.S. military aid could flow to the Muslim state.

Determined to reduce Iranian influence in Bosnia after the peace accords, the administration decided to make Cengic’s ouster a litmus test of Izetbegovic’s willingness to choose an alliance with the United States and the West over Iran and the Muslim world.

But Cengic stubbornly refused to leave, forcing the Clinton administration to delay the delivery of $100 million in tanks, armored personnel carriers and other weapons for the Bosnian military until he was ousted. Finally in November, Cengic quit and the U.S. military hardware–which had been sitting on a cargo ship–was unloaded.

Cengic was not the only high-profile Bosnian official forced from power under U.S. pressure last year. In March 1996, the U.S. demanded that Interior Minister Bakir Alispahic, who had control over Bosnia’s security apparatus, also be removed from his position.

The United States had detected that Alispahic’s agency had given Iran the identity of an undercover CIA officer serving in Bosnia. The officer was pulled out of the country in 1995. Then in early 1996, North Atlantic Treaty Organization forces serving in Bosnia uncovered a terrorist training camp manned by Iranian officials in Bosnia. Alispahic was in direct command of the camp.

Administration officials continue to stress that their efforts to weed out Iranian influence from Bosnia have been successful. Acting CIA Director George Tenet testified Wednesday before the Senate Select Committee on Intelligence that “the Iranian-Bosnian military relationship has been terminated, and we judge that Bosnia is in compliance with the foreign forces provision of the Dayton accords.”

But despite his ouster, Cengic, the scion of a powerful old Muslim family in Sarajevo, never lost his influence behind the scenes, U.S. officials conceded. His ties to Izetbegovic run deep: The two were jailed together as Muslim dissidents in the early 1980s under Yugoslavia’s old Communist regime. And his role as Bosnia’s master arms dealer during the war made him a hero among many Bosnian Muslims.

“He represents a political force in Bosnia,” acknowledged one U.S. official.

His firing only seemed to enhance his stature. Iranian officials, who clearly see themselves as in a competition with the United States to win hearts and minds in Bosnia, appears to be trying to capitalize on the resentment inside Bosnia against the U.S. role in the Cengic affair.

“I think that the Americans should not have meddled in the personnel issues of Bosnia-Herzegovina,” Mohammad Ibrahim Teherian, the Iranian ambassador to Bosnia, said in a recent interview with a Sarajevo newspaper. “With their behavior toward Mr. Cengic, they have made him an even greater hero of his country. One can see that from all the letters that arrived at our embassy on that occasion.”

U.S. intelligence officials conceded that the report on Cengic is “inconvenient intelligence” and administration officials who had greeted the report skeptically said that if it were entirely accurate, they would have to fundamentally alter their policy toward Bosnia.

Some administration officials said they will not raise the issue of Cengic with Izetbegovic unless they receive more proof. “I don’t see the evidence to support the allegation,” noted one senior administration official.

Although the sources of the information to the U.S. intelligence community have not been disclosed to most policymakers, some skeptics in the administration speculated that the report may have been inspired by Croatian officials, who are still not comfortable with their new, U.S.-brokered alliance with the Bosnian-Muslims and want to cast the Muslim government in a negative light in Washington.

James Pardew, a U.S. special envoy overseeing the American-backed military aid program for Bosnia, said he sees “no evidence that Cengic has an official or unofficial intelligence or security role” in Bosnia, he said in an interview. “If we did see it, we would raise hell about it.”

After Cengic resigned Nov. 20, Pardew praised Izetbegovic, saying that he had “chosen to be part of Europe.”

U.S. officials do not deny that Iran continues to see Bosnia as a strategic target for expanding its influence into Europe but stressed that they are closely monitoring Iranian intelligence efforts in the country.

A year ago, they said, Iran had 40 officials in its embassy in Sarajevo. Now its staff is down to 17. In January 1996, there were 300 Iranian Revolutionary Guard cadres in Bosnia and now there are none officially declared to the Bosnian government.

At the same time, nine training camps that were in operation a year ago and were being run either by Iranian agents or moujahedeen forces in Bosnia have been closed, U.S. officials said. Bosnian soldiers and intelligence agents are no longer being sent to Iran for training either.

Cengic’s removal from the defense ministry, U.S. officials added, was one of the last major actions needed to dramatically reduce Iranian influence.