In February, 1991, at the height of the Persian Gulf War, then-Agriculture Secretary Clayton K. Yeutter approved U.S. aid to Turkey's state-owned tobacco monopoly. His action reversed a decision by program officials who believed the grant violated department guidelines.

Yeutter, now President Bush's chief domestic policy adviser, acted after the Turkish ambassador to the United States linked the financing to use of an air base in Turkey from which U.S. warplanes were attacking Iraqi troops, according to the internal documents.

A central focus of congressional inquiries into prewar assistance to Iraq is the Administration's effort to dispense $1 billion in taxpayer-guaranteed loan credits to Iraq from the Agriculture Department's Commodity Credit Corp.

"The problem starts when this Administration, or any Administration, uses the CCC program as under-the-table foreign aid," according to Sen. Patrick J. Leahy (D-Vt.), whose Senate Agriculture Committee is investigating the use of agriculture funds to assist Iraq.

Yeutter also played a critical role in the CCC program. In the fall of 1989, he reinstated the $1 billion for Iraq over objections from officials in his own agency, who warned that funds might have been diverted to finance Iraqi military projects.

The Times reported in February that Yeutter's intervention followed a call from Secretary of State James A. Baker III, and Baker has said that he was acting under authority of a top-secret order signed by the President mandating increased ties to Iraq.

The White House press office did not return calls for Yeutter about the Turkish grant. An Agriculture Department official said that granting $650,000 in aid for the Turkish cigarette factory required a change of policy but did not violate any laws or guidelines.

"There was no legal question involved," said Philip L. Mackie, head of the office that provided the grant. "It was a policy matter."

The money came from the Agriculture Department's Targeted Export Assistance program, which is designed to promote U.S. agricultural exports. Mackie said that it was the only time in the program's history that funds were used to buy machinery for a profit-making venture.

The issue of the Turkish aid began in 1990, when a tobacco-industry trade organization had asked for $850,000 in export assistance funds to help Turkey's state tobacco monopoly manufacture American-style cigarettes and thus import more U.S. tobacco. Questions arose because $650,000 of the money was to be used by Turkey to buy production machinery.

"We needed a toasting machine which is required to manufacture proper-tasting American blends," said Kirk Wayne, president of Tobacco Associates, the trade group. "You cannot manufacture a good-quality, American-blend cigarette without the particular type of machinery."

But program guidelines did not allow the use of funds to pay for equipment or capital expenditures, according to a Feb. 2, 1991, memo written by the director of the department's tobacco, cotton and seeds division.

"The division supports the $200,000 for supportive consultant services, but does not feel the $650,000 for equipment is justifiable," said the memo. "Our reasoning: Such an equipment purchase appears to be a subsidy of a capital expenditure on behalf of a for-profit entity."

After learning of the opposition, 15 congressmen asked the department to reconsider, but the department was prepared to stand its ground. The concerns were described in a letter drafted for Rep. Charlie Rose (D-N.C.), chairman of the House Agriculture Committee's subcommittee on tobacco.

"Permitting program participants to utilize TEA funds to finance capital expenditures for a foreign entity could irrevocably damage the integrity of the TEA program," said the letter. "Accordingly, we are unable to approve the $650,000 portion of the request seeking to fund a capital expenditure for a foreign commercial entity."

But before the letter was sent, Turkish Ambassador Nuzhet Kandemir met with Yeutter on Feb. 15, 1991, to argue in favor of the $650,000 as a way to help quiet anti-American sentiment in Turkey.

At the time, some Turks opposed the use of an air base in Turkey by U.S. warplanes bombing Iraqi troops in preparation for the ground phase of the Gulf War.

"Ambassador Kandemir mentioned that Turkey's participation in the coalition against Iraq has caused some problems for its government and that it would be helpful if they could show the Turkish people economic benefits of increased cooperation with the United States," according to the confidential minutes of the meeting.

Richard T. Crowder, an undersecretary of agriculture, told Kandemir that the request remained under review in part because it "did not fit into normal guidelines for TEA programs," according to the account.

Yeutter "described the situation as a tough call, considering the limited funds available, a tight budget outlook and policy guidelines which must be followed," according to the minutes.

Within days, the department reversed itself and the Turkish government was told that the full $850,000 would be provided.

One high-level Agriculture Department official said in an interview that several senior officials questioned the legality and propriety of the transaction.

"It was no doubt in violation of our own regulations," said the official, who spoke on the condition that his name be withheld. "And our regulations are based both on the law and the legislative history. We can't just do as we please."

Mackie, the official in charge of the program, acknowledged that awarding the grant went beyond what the program had done in the past and involved high-level discussions within the department.

On March 5, 1991, the Agriculture Department sent a letter to Rep. Rose. It said: "Thank you for your letter regarding Tobacco Associates' successful Targeted Export Assistance program in Turkey. Accordingly, the Department has approved the request."

Waas is a special correspondent and Frantz is a Times staff writer.