By Susan Cornwell
WASHINGTON (Reuters) - The U.S. House of Representatives on Wednesday approved a defense bill requiring the military to handle suspected militants allied with al Qaeda, acting not long after President Barack Obama removed a veto threat from the controversial legislation.
The bill was expected to pass the Senate this week and then go to President Obama's desk for his signature into law. Shortly before the House vote, the White House announced the president's advisers would not recommend a veto, although they still had concerns about the measure.
The bill, which passed on a vote of 283 to 136, also imposes new sanctions against Iran's central bank and pre-emptively freezes some aid to Pakistan.
In recent weeks members of Obama's national security team had expressed opposition to the section that broadens the armed forces' powers over suspected militants by requiring that foreigners allied with al Qaeda be held in military custody even if they are captured in the United States.
But the White House statement on Wednesday said lawmakers had made "several important changes" in the last few days.
"While we remain concerned about the uncertainty that this law will create for our counterterrorism professionals, the most recent changes give the president additional discretion in determining how the law will be implemented, consistent with our values and the rule of law, which are at the heart of our country's strength," the White House statement said.
"If in the process of implementing this law we determine that it will negatively impact our counterterrorism professionals and undercut our commitment to the rule of law, we expect that the authors of these provisions will work quickly and tirelessly to correct these problems," it added.
The Obama administration also had misgivings about the bill's requirement for sanctions on foreign financial institutions that deal with Iran's central bank, the main conduit for Tehran's oil revenues. But the White House never issued a veto threat on that part of the bill.
Administration officials shared the goal of pressuring Iran over its nuclear program, but said they worried the legislation would roil oil markets and antagonize allies. Lawmakers said they made some changes to add flexibility to the sanctions.
The bill also would place a pre-emptive freeze on hundreds of millions of dollars in aid to Pakistan until Congress gets assurances from the U.S. secretary of defense that Islamabad is helping fight the spread of homemade bombs in the region.
The legislation authorizes U.S. defense programs from war fighting to weapons building, and is widely considered a must-pass bill.
The measure is the latest battle in a long struggle between Obama, a Democrat, and some lawmakers over whether terror suspects should be prosecuted as "enemy combatants" before military commissions and held at Guantanamo Bay, Cuba, or treated as criminal suspects in the U.S. court and prison system.
Republicans and some Democrats have urged that military custody and military courts should be used as a rule, even when the suspect is picked up in the United States. The administration has sought to keep its flexibility in interrogating and detaining terrorism suspects.
Congress has repeatedly voted to limit transfers of detainees from the U.S. military prison at Guantanamo Bay, Cuba, to the United States, while Obama has long sought ways to close the prison.
Senator Carl Levin, a Democrat, said earlier this week that new language added to the bill by House and Senate lawmakers "make it 100 percent clear" that there will be no interference with the FBI or other civilian law enforcement."
FBI Director Robert Mueller said Wednesday the changes mostly resolved his concerns about the FBI's authority in such terrorism cases, but he still was worried about whether the bill could hurt the FBI's ability to get suspects to cooperate.
He told a Senate committee that the FBI and the military potentially could show up at the arrest scene at the same time, with uncertainty over "who's going to do what."
The White House welcomed a change that gave the president, instead of the secretary of defense, the power to waive the requirement that a suspect be placed in military custody, if the president certifies that such a waiver is the U.S.' national security interest.
Supporters of the legislation noted that Americans are exempted from the bill's requirement for mandatory military custody. "The provisions do not extend any new authorities to detain U.S. citizens," said House Armed Services Chairman Buck McKeon, a Republican.
But the legislation also authorizes the U.S. military to indefinitely detain terror suspects that are placed in its custody, including Americans. This horrifies civil rights advocates.
"Giving up American ideals will not make us safer," Representative Barbara Lee, a Democrat, said during the House debate.
Some critics of the legislation suspected the White House decided that to veto the bill might exact too heavy of a political price ahead of next year's elections.
"It's really distressing that the White House clearly shares the concerns of the national security establishment (against the bill), but feels like a veto is not politically sustainable," said Heather Hurlburt, executive director of the non-profit National Security Network.
The measure authorizes $662 billion for defense in fiscal 2012, including the Pentagon's base budget and the war in Afghanistan, although appropriators must still approve the numbers before money is spent.
Appropriations measures for 2012 are caught up a political wrestling match over payroll taxes that lawmakers hope to resolve by the end of this month.
(Additional reporting by Jim Vicini; editing by Anthony Boadle)