The plan, led by the federal Overseas Private Investment Corp., has raised some eyebrows inside the administration because it comes just a few months before the U.S.-led Coalition Provisional Authority is to turn over sovereignty to a still-undetermined Iraqi government. It is far from clear whether the trade-finance project would get much done before the scheduled June 30 handover or whether the new Iraqi government would abandon it.

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But OPIC officials believe their plan to facilitate letters of credit for Iraqi importers will help the economy recover and modernize. OPIC officials stress the assistance the project would provide to Iraqi private companies and private banks. It is an attempt to "put in the foundations that will achieve economic freedom for the Iraqis," said OPIC President Peter Watson.

The project would work through a series of guarantees for letters of credit, a standard tool used to smooth the flow of trade. Letters of credit guarantee payment to the seller -- say, a German drug company or an American tractor maker -- at the time it delivers the goods. Without such a letter, Iraqi importers -- who are by virtue of the country's situation considered huge credit risks -- would have to put up the cash beforehand and trust that the goods would eventually arrive.

In the case of the OPIC/Citigroup project, a Baghdad bank might issue a letter of credit for a local company's imports. An international bank would confirm the letter, assuming the risk of nonpayment. A separate institution, set up by Citigroup, would then guarantee that the international bank gets paid. Citigroup and OPIC would guarantee that the separate institution -- still nameless -- gets paid. Finally, the coalition would pledge to use Iraqi oil revenue to cover any Citigroup and OPIC losses.

All the banks along the way would collect fees for their participation, and as long as the coalition runs Iraq, there is essentially no risk for any of them.

The same sort of arrangement could work for providing letters of credit for Iraqi government ministries through the existing Trade Bank of Iraq. While OPIC argues that it is trying mainly to assist the private sector in Iraq, officials acknowledge that the bulk of the financing would inevitably go to the Iraqi government. Ten Iraqi banks already issue letters of credit on their own, according to the Treasury Department.

At one point, OPIC and Citigroup even proposed demanding that a fixed percentage of Iraqi government procurement go through the new financing mechanism. U.S. officials later decided it would be unwise -- both politically and economically -- to guarantee Citigroup and OPIC a lucrative slice of that business.

Citigroup has pledged $50 million for the project, with OPIC putting up the remaining $150 million in financing. Duncan King, a Citigroup spokesman, declined to comment on the OPIC deal, as did Tom Foley, the coalition's director of private-sector development in Baghdad.

The looming question is what happens after the coalition cedes power. OPIC still has to get the nod from Congress to launch the project, and so, at best, OPIC officials predict it will be operational at the end of March.

Amid the transitional uncertainty, OPIC and Citigroup insist that starting April 1, the coalition put cash from Iraq's oil revenue in offshore accounts to cover any outstanding letters of credit.

OPIC officials acknowledge that when they began developing the idea, they thought the coalition would be running Iraq for at least a couple more years. Now, OPIC and Citigroup appear to be pressing the current, U.S.-appointed Iraqi authorities to do their best to commit the future government to honoring the financing plan.

Confidential draft documents include a section in which the coalition and Trade Bank of Iraq would agree to "use reasonable efforts" to convince the current Finance Ministry and Central Bank to acknowledge "the intention of the Republic of Iraq to continue operating" under the arrangement after the transition.

Mr. Watson said the administration isn't trying to present the incoming government with a fait accompli. "We're not going to force it on them," he said. "I don't prejudge whether they'll like this or not."