Army General Wesley Clark, the Supreme Allied Commander Europe (Saceur) was informed of the decision late on Tuesday during a working visit to Lithuania. Air Force General Joseph Ralston, who is currently vice-chairman of the Joint Chiefs of Staff, has been designated to succeed him.
News of General Clark's premature departure made immediate waves in Washington, amid speculation about tensions between the administration and the top brass over the conduct of the Kosovo war.
General Clark, 54, had made no secret of his view that the military was hamstrung and the conflict prolonged by the politicians' desire to avoid civilian casualties. His support for ground troops also set him apart from President Clinton, who believed that the conflict could be won from the air.
The Pentagon insisted yesterday that General Clark's departure was part of the normal rotation of top posts. A spokesman, Kenneth Bacon, noted that General Clark's initial two-year term as Saceur had already been extended by one year, and that it was being curtailed by only three months.
He denied that the Defence Secretary, William Cohen, was unhappy with General Clark, saying that Mr Cohen believed that he had "performed extremely well in this job in a very demanding time".
The timing of the move, Mr Bacon explained, had been dictated solely by the choice of General Ralston as General Clark's successor.
Joseph Ralston's term as Vice-Chairman of the Joint Chiefs would expire next February, and regulations stipulated that there should be no more than 60 days between leaving one appointment and taking up another. General Ralston had planned to retire to Alaska, and the Nato post of Saceur, arguably the second most important military post an American soldier can hold, was the only post he would accept.
General Ralston's career is not without its own blemishes. Seemingly set two years ago to become the next chairman of the Joint Chiefs, he was ruled out of the running after revelations about an adulterous affair.
Coinciding with a hue and cry in the military about the discharge of a female pilot for just such an offence and complaints of lenience shown towards senior officers, the disclosures blighted his prospects of further promotion - to the undisguised regret of the defence secretary.
Confronted with a choice between keeping General Ralston in the forces and creating the impression of dissent with General Clark, Mr Cohen chose the latter.
Asked directly whether his departure was due to his performance in Kosovo, General Clark was quoted as saying: "Not that I know of." But he would not elaborate.
The White House went out of its way yesterday to deny that General Clark was being sacked. "The President has the highest regard for General Clark. He did incredible and invaluable work in the Kosovo conflict and the re- alignment of commanders-in-chief in no way reflects badly on his performance," a spokesman said.
The word is that the Pentagon has recommended that the outgoing Saceur be offered a senior ambassadorship.
General Clark indicated, however, that he was not ready to consider his future. "There is a long time yet to do this job," he said, "and I've got to keep my attention on it."
The changes are expected to be formally approved by Nato's defence planning committee within a few days.
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