In what could be the most serious threat yet to Afghanistan's new government, a warlord in the southern province of Paktia is refusing Afghan leader Hamid Karzai's entreaties to step down as governor. And he warns that the dispute could reignite an armed conflict that left some 50 fighters dead two weeks ago.

Afghans close to the government fear that the standoff could seriously undermine Karzai's tenuous legitimacy and throw Afghanistan into further chaos. The dispute could also complicate U.S. efforts to stamp out pockets of Al Qaeda and Taliban forces-efforts that have bogged down in recent weeks as the struggle for power and perks among warlords eclipses the U.S. war on terror. An Afghan intelligence official says Al Qaeda and Taliban warriors may be regrouping in Paktia province, which borders a sympathetic Pakistani region where many of them are believed to have fled.

The warlord, Padshah Khan Zadran, told NEWSWEEK in an interview on Wednesday that he would not resign as governor of Paktia despite pressure from Karzai, who is seeking to install a new governor since the conflict began. "Mr. Karzai is misusing his power," said Zadran, a burly, rugged-looking man with a jet-black beard who sports a bandoleer of bullets. "Everybody supports me. Only a few people related to Al Qaeda don't want me."

Zadran contends that his rival for the governorship, Haji Saifullah, and top people around him are linked to Al Qaeda and Mullah Omar, the ousted Taliban leader.

His allegations point up how murky the search for Al Qaeda in Afghanistan has become as warlords jockey for political advantage. Zadran's brother, Amanrullah Zadran, who is Karzai's minister for tribal affairs, threatened to quit the government if the warlord is ousted. Sitting across from his brother, Amanrullah Zadran said the country is still riddled with Al Qaeda members, including Arabs and Chechens, and he endorsed his brother's view of the rival governor, Saifullah, as someone with suspect loyalties. He was also dismissive of Karzai. "I don't listen to him," he said. "I don't report to him. I will resign to the United Nations, not to Karzai."

Karzai now faces a brutal dilemma: if he fires Zadran, the warlord may simply refuse to go, triggering a new war in Paktia. He would also suffer a public blow if Zadran's brother steps down. But if Karzai does not dismiss Zadran, he will lose prestige and, Afghan observers say, inspire other warlords to defy him as well.

A spokesman for Karzai's government was not immediately available to respond to the comments by the Zadran brothers. Zadran, who was in Kabul for a tribal council meeting, said he was heading back to the province on Saturday. In Paktia's capital city of Gardez, meanwhile, police officials loyal to Saifullah told NEWSWEEK that they would never accept Zadran, whom one described as a "bad man." If no solution is found, says Sharif, an Afghan intelligence official, "there will be a war."

The dispute highlights the disconnect between the somewhat rosy view of Afghanistan's future coming out of Washington and the grimmer reality on the ground, which is that politics in this land is still a matter of tribal and family loyalty, as well as still shadowy ties to Al Qaeda and Taliban. As Amanrullah Zadran told NEWSWEEK, "He is my brother. What can I do? It is a matter of tribal pride and prestige."

The stakes for Karzai-and for Afghanistan-could not be higher. While a shaky peace prevails for now, secured largely by warlords' desire to stay on America's good side, aid officials say the economic and social situation is deteriorating. It is not uncommon to hear people in some cities remark that life was better under the Taliban. That further complicates Karzai's task of consolidating control without an army and with a meager contingent of international peacekeepers confined to Kabul. While the United States and Britain are still resisting a large-scale peacekeeping force throughout the country, international observers say that without physical security, fear will paralyze an economy that has been devastated by 23 years of war and which is virtually without resources. Such an outcome, longtime observers fear, could lay the groundwork for a repeat of the country's descent into civil war in the early '90s.