By Dean Yates
BAGHDAD, April 15 (Reuters) - The anti-U.S. movement of Shi'ite cleric Moqtada al-Sadr is now Iraq's main humanitarian organisation helping needy Iraqis, a relief group said in a report that is certain to cause concern in Washington.
In the report published on Tuesday, Refugees International said Sadr's Mehdi Army militia as well as other Shi'ite and Sunni Arab militias were expanding their influence by providing food, shelter and other essentials to Iraqis left destitute by war.
The findings underscore Sadr's mass appeal ahead of provincial elections in October and will cause concern for U.S. officials who see reducing the influence of the militias as one of the Iraqi government's key challenges.
Sadr's political movement will compete for the first time in the local polls and is expected to make gains at the expense of other Shi'ite parties supporting Prime Minister Nuri al-Maliki.
Sadr, once an ally of Maliki, has split with the prime minister.
The Washington-based Refugees International said the Sadrist movement was operating on a similar model to Lebanon's Hezbollah, a group sponsored by Shi'ite Iran that provides a range of humanitarian services in Lebanon.
"Through a Hezbollah-like scheme, the Shi'ite Sadrist movement has established itself as the main service provider in the country," said the report.
"This sustainable programme provides shelter, food and non-food items to hundreds of thousands of Shi'ites in Iraq."
Refugees International said it visited many locations inhabited by displaced families throughout Baghdad.
It said that as part of the Sadrist's assistance programmes, the Mehdi Army "resettles" displaced Iraqis free of charge in homes that belong to Sunni Arabs. The militia also provided stipends, food and heating and cooking oil.
"Similarly, other Shi'ite and Sunni groups are gaining ground and support through the delivery of food, oil, electricity, clothes and money to the civilians living in their fiefdoms," said the report.
"Not only do these militias now have a quasi-monopoly in the large-scale provision of assistance in Iraq, they are also recruiting an increasing number of civilians to their militias -- including displaced Iraqis."
U.S. officials want the Maliki government to erode the influence of the militias. Maliki launched an offensive against the Mehdi Army in the southern city of Basra late last month. Hundreds of people were killed in fighting.
The International Organisation for Migration (IOM) said last month that 2.7 million Iraqis were displaced internally and 2.4 million living as refugees, mainly in Syria and Jordan.
Refugees International accused the Iraqi government of being either "unwilling or unable" to respond to the humanitarian crisis. It also rebuked the international community, saying it was "largely in denial" over the situation.
Analysts expect Iraq's provincial elections to be the battleground for a bitter power struggle in the Shi'ite south, where the Sadrists and a rival organisation, the Supreme Islamic Iraqi Council, are vying for influence.
The council backs Maliki and controls nearly all nine provincial governments in the south. But there is unhappiness at its performance in delivering services, U.S. officials say. (Editing by Richard Balmforth)