Mr. James Wolfensohn, president of the World Bank, can sympathize with Mr. Kofi Annan. The last thing the bank needs is a politicized fight of any kind, but it faces a decision that could start a firestorm unlike any in its history.

At issue is a $160 million loan to help China relocate 58,000 poor farmers to richer land in western China. The problem is that 85 percent of them are Muslims and ethnic Chinese who will be moved to territory that has long been considered part of Tibet. The bank estimates that the shift would double the population in Dulan and lower the proportion of native Tibetans in the area from 23 percent to 14 percent. Environmentalists are concerned that the move will damage the plateau where the farmers are to be resettled. Human-rights activists worry that it may not be voluntary and that prison labor may be used to carry out the project.

China argues that project's purpose is poverty relief. The farmers are poor because their land is depleted. Critics say the program is designed to marginalize Tibetans in their native land. The United States opposes the loan, and it has allies among the bank's 24 executive-board members who voted Thursday on approval of the funds. If the loan is approved, the U.S. Congress may then use the issue to block funds for the organization in the future. If it is held up, China has threatened to re-evaluate its relationship with the bank.