Millions of dollars of aid earmarked for the Ukrainian Government will be diverted to private pro-democracy projects, United States authorities have said.

The change in plans came after a review of US policy towards Ukraine.

State Department officials said Washington remained unhappy with Kiev's response to accusations that it supplied an air defence system to Iraq.

Ukraine denies selling the Kolchuga early warning radar system to Iraq

But the withdrawal of $50m in assistance will not affect funds used for the clean-up at the Chernobyl nuclear power station.

Relations between Washington and Kiev became troubled when a former bodyguard to Ukrainian President Leonid Kuchma arrived in the US with a tape suggesting Mr Kuchma authorised the sale of the Kolchuga radar system to Iraq.

Ukraine has repeatedly denied that it sold the system, which detects enemy aircraft but does not emit a signal the aircraft can detect.

But it failed to convince a team of US and UK experts who investigated the alleged deal with Saddam Hussein's regime last year.

The US and allies including the UK are building up forces in the Gulf preparing for a possible invasion of Iraq, should force be deemed necessary to ensure Saddam Hussein has no weapons of mass destruction.

'Recent difficulties'

State Department spokesman Louis Fintour said the US policy review still backed a "stable democratic market-oriented Ukraine".

"At the same time, it acknowledges the recent difficulties in our bilateral relationship, including the matter of Kolchuga transfers to Iraq, where the Ukrainian Government has not satisfactorily answered our questions," he said.

"We will be looking at adjustments in our ongoing assistance programme to bolster support for democratic reform in Ukraine."

Because of the Kolchuga dispute, the US has already suspended $55m in aid to Ukraine - about 35% of the total funds pledged under the Freedom Support Act.