One option is to try to resettle them voluntarily in a third country. Another is application for residency or asylum in Iraq -- but Iraqi leaders have long been hoping to expel them
Excerpts of an article about MKO in Boston Globe: US officials have asked the United Nations High Commissioner for Refugees to help resettle members of an Iranian rebel group living in exile in Iraq, even though the United States classifies the group as a terrorist organization. Members of the Mujahedin-E-Khalq organization, who live in a US-protected encampment north of Baghdad, fear persecution in Iran, but find themselves increasingly unwelcome in Iraq. One option is to try to resettle them voluntarily in a third country. Another is application for residency or asylum in Iraq -- but Iraqi leaders have long been hoping to expel them. A third is to repatriate them to Iran, with written assurances from Tehran that they will not be persecuted, said a US official based in Washington. Meanwhile, the fate of the Mujahedin-E-Khalq remains in limbo. On Monday, State Department spokesman Adam Ereli said members of the group have been determined to be ''protected persons" -- or noncombatants -- under the Geneva Conventions, but that the group itself is still classified as a terrorist organization. ''They have a well-founded fear of persecution in Iran. Iraq doesn't want them," said one Washington-based US official. ''It's a conundrum."

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