This is the second of two companion reports on Iraq after the Surge, which Crisis Group is publishing simultaneously, with identical Executive Summaries and policy Recommendations. Part I analyses changes in the Sunni landscape. Part II analyses the state of political progress.

Against the odds, the U.S. military surge contributed to a significant reduction in violence. Its achievements should not be understated. But in the absence of the fundamental political changes in Iraq the surge was meant to facilitate, its successes will remain insufficient, fragile and reversible. The ever-more relative lull is an opportunity for the U.S. to focus on two missing ingredients: pressuring the Iraqi government to take long overdue steps toward political compromise and altering the regional climate so that Iraq’s neighbours use their leverage to encourage that compromise and make it stick. As shown in these two companion reports, this entails ceasing to provide the Iraqi government with unconditional military support; reaching out to what remains of the insurgency; using its leverage to encourage free and fair provincial elections and progress toward a broad national dialogue and compact; and engaging in real diplomacy with all Iraq’s neighbours, Iran and Syria included.

Many factors account for the reduction in violence: the surge in some cases benefited from, in others encouraged, and in the remainder produced, a series of politico-military shifts affecting the Sunni and Shiite communities. But there is little doubt that U.S. field commanders displayed sophistication and knowledge of local dynamics without precedent during a conflict characterised from the outset by U.S. policy misguided in its assumptions and flawed in its execution. A conceptual revolution within the military leadership gave U.S. forces the ability to carry out new policies and take advantage of new dynamics. Had they remained mired in past conceptions, propitious evolutions on the ground notwithstanding, the situation today would be far bleaker.

One of the more remarkable changes has been the realignment of tribal elements in Anbar, known as the sahwat, and of former insurgents, collectively known as the “Sons of Iraq”. This was largely due to increased friction over al-Qaeda in Iraq’s brutal tactics, proclamation of an Islamic state and escalating assaults on ordinary citizens. But the tribal and insurgent decisions also were aided by enhanced military pressure on the jihadi movement resulting from augmented U.S. troops: in both instances U.S. forces demonstrated more subtle understanding of existing tensions and intra-Sunni fault lines. Overall, the military campaign calmed areas that had become particularly violent and inaccessible, such as Anbar and several Baghdad neighbourhoods, and essentially halted sectarian warfare.

But on their own, without an overarching strategy for Iraq and the region, these tactical victories cannot turn into lasting success. The mood among Sunnis could alter. The turn against al-Qaeda in Iraq is not necessarily the end of the story. While some tribal chiefs, left in the cold after Saddam’s fall, found in the U.S. a new patron ready and able to provide resources, this hardly equates with a genuine, durable trend toward Sunni Arab acceptance of the political process. For these chiefs, as for the former insurgents, it mainly is a tactical alliance, forged to confront an immediate enemy (al-Qaeda in Iraq) or the central one (Iran). Any accommodation has been with the U.S., not between them and their government. It risks unravelling if the ruling parties do not agree to greater power sharing and if Sunni Arabs become convinced the U.S. is not prepared to side with them against Iran or its perceived proxies; at that point, confronting the greater foe (Shiite militias or the Shiite-dominated government) once again will take precedence.

Forces combating the U.S. have been weakened but not vanquished. The insurgency has been cut down to more manageable size and, after believing victory was within reach, now appears eager for negotiations with the U.S. Still, what remains is an enduring source of violence and instability that could be revived should political progress lag or the Sons of Iraq experiment falter. Even al-Qaeda in Iraq cannot be decisively defeated through U.S. military means alone. While the organisation has been significantly weakened and its operational capacity severely degraded, its deep pockets, fluid structure and ideological appeal to many young Iraqis mean it will not be irrevocably vanquished. The only lasting solution is a state that extends its intelligence and coercive apparatus throughout its territory, while offering credible alternatives and socio-economic opportunities to younger generations.

The U.S. approach suffers from another drawback. It is bolstering a set of local actors operating beyond the state’s realm or the rule of law and who impose their authority by force of arms. The sahwat in particular has generated new divisions in an already divided society and new potential sources of violence in an already multilayered conflict. Some tribes have benefited heavily from U.S. assistance, others less so. This redistribution of power almost certainly will engender instability and rivalry, which in turn could trigger intense feuds – an outcome on which still-active insurgent groups are banking. None of this constitutes progress toward consolidation of the central government or institutions; all of it could amount to little more than the U.S. boosting specific actors in an increasingly fragmented civil war and unbridled scramble for power and resources. Short-term achievement could threaten long-term stability.

By President Bush’s own standards, the military surge was useful primarily insofar as it led the Iraqi government to forge a national consensus, recalibrate power relations and provide Sunni Arabs in particular with a sense their future was secure. Observers may legitimately differ over how many of the administration’s so-called benchmarks have been met. None could reasonably dispute that the government’s performance has been utterly lacking. Its absence of capacity cannot conceal or excuse its absence of will. True to its sectarian nature and loath to share power, the ruling coalition has actively resisted compromise. Why not? It has no reason to alienate its constituency, jeopardise its political makeup or relinquish its perks and privileges when inaction has no consequence and the U.S. will always back it.

The surge is the latest instalment in a stop-and-start project to build a functioning state and legitimate institutions. All along, the fundamental challenge has been to settle major disputes and end a chaotic scramble for power, positions and resources in a society that, after a reign of terror, finds itself without accepted rules of the game or means to enforce them. Politically, this conflict has expressed itself in disputes, both violent and non-violent, over the structure of the state system (federalism/regionalisation and the degree of power devolution); ownership, management and distribution of oil and gas wealth (a hydrocarbons law); internal boundaries (particularly of the Kurdistan region); mechanisms for settling relations between post-Saddam “winners” and “losers” (for example, de-Baathification, amnesty, reintegration); and the way in which groups gain power (elections vs. force).

A small number of agreements have been reached and are regularly trumpeted. But they have made virtually no difference. Without basic political consensus over the nature of the state and the distribution of power and resources, passage of legislation is only the first step, and often the least meaningful one. Most of these laws are ambiguous enough to ensure that implementation is postponed, or that the battle over substance becomes a struggle over interpretation. Moreover, in the absence of legitimate and effective state and local institutions, implementation by definition will be partisan and politicised. What matters is not principally whether a law is passed in the Green Zone. It is how the law is carried out in the Red Zone.

Three things are becoming increasingly clear: First, the issues at the heart of the political struggle cannot be solved individually or sequentially. Secondly, the current governing structure does not want, nor is it able, to take advantage of the surge to produce agreement on fundamentals. Thirdly, without cooperation from regional actors, progress will be unsustainable, with dissatisfied groups seeking help from neighbouring states to promote their interests. All this suggests that the current piecemeal approach toward deal making should be replaced with efforts to bring about a broad agreement that deals with federalism, oil and internal boundaries; encourages reconciliation/accommodation; and ensures provincial and national elections as a means of renewing and expanding the political class. It also suggests yet again the need for the U.S. to engage in both genuine negotiations with the insurgency and for vigorous regional diplomacy to achieve agreement on rules of the game for outside actors in Iraq.

In the U.S., much of the debate has focused on whether to maintain or withdraw troops. But this puts the question the wrong way, and spawns misguided answers. The issue, rather, should be whether the U.S. is pursuing a policy that, by laying the foundations of legitimate, functional institutions and rules of the game, will minimise the costs to itself, the Iraqi people and regional stability of a withdrawal that sooner or later must occur – or whether it is simply postponing a scenario of Iraq’s collapse into a failed and fragmented state, protracted and multilayered violence, as well as increased foreign meddling.

The surge clearly has contributed to a series of notable successes. But the question is: Now what? What higher purpose will they serve? For the first four years of the war, the U.S. administration pursued a lofty strategy – the spread of democracy; Iraq as a regional model – detached from any realistic tactics. The risk today is that, having finally adopted a set of smart, pragmatic tactics, it finds itself devoid of any overarching strategy.

Baghdad/Istanbul/Damascus/Brussels, 30 April 2008