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The insurgents are currently in a process of consolidation, reconstituting themselves into tighter and more committed cells, cleaving away the hangers-on and the remotely suspect. Although Saddam's arrest has hardly persuaded them to put down their weapons, some are feeling more cornered than before, others angrier and even more willing to wreak havoc. That may mean they're a little more dangerous, now, their antennae more acutely tuned to pick up signs of trouble, making them more careful to avoid unnecessary risk and more vigilant in their activities.

Their reactions to Saddam's arrest are a complex mix, reflecting a diversity of motivations behind their insurgency. The announcement was initially greeted with genuine shock and disbelief (still lingering in some quarters). Then, as the daze and denial lifted for some, the pragmatism that comes with acceptance began to kick in. And some of the who have evolved into organized networks — rather than ad hoc groups and autonomous cells — believe they are entering a new phase of the war. The U.S. military has snared its big fish, and is now trawling for the smaller ones. This means they must adapt, again, re-focus and move on.

The bad news breaks

Abu Raheman, commander of an Iraqi insurgent cell and an ex-military officer, had the television on when the news of Saddam's capture broke on Sunday Dec 14. Arab satellite channels were full of rumors, then confirmations by unnamed U.S. sources, and finally the announcement by administrator Paul Bremer. As the U.S. diplomat declared "We got him," Abu Raheman sat quietly. He lent forward on the edge of his seat, his face set in concentration. From time to time he passed comment as the conversation around him swayed back and forth over whether the story was true. While others become agitated in their shock, he remained focused, studious. In his mind he weighed what he was hearing on the television with what he knew of Saddam and those who had been close to him, of the military's intelligence-gathering and its operations, calculating the chances of the man he still calls President having fallen into U.S. hands. Mid-way through the afternoon he still wasn't totally convinced, but he certainly knew not to dismiss it. Clearly, he thought, he needed more information. Confirmation from sources and opinions he could trust.

Even then, he was already contemplating the meaning of it all. He knew he would have to change the operations of his cell, and communicate with the commanders above him before taking any action. In the days that followed, his methods shifted in accordance with what he recognized as a new situation. One thing hadn't changed for his commanders and for the roughly two dozen guerrillas under his own command — their will to fight. "We will continue," he said. "We are not Fedayeen, we are mujahideen. We don't fight for Saddam, we fight for Iraq."

Operations suspended

Two Baghdad cells with which I am familiar have temporarily suspended operations, moving into what one of the cell leaders described as a "technical" phase during which the new U.S. tactics will be studied, in order to formulate new modes of operation. Other cells, even those within the same broad network, have continued their attacks. At least one, deeply fanatical cell from this same organization has actually stepped up its strike rate in a blush of rage since Saddam's capture. This crew appears willing to risk the increased danger of exposure to give violent release to those emotions.

The Monday that followed the arrest announcement saw a spate of car- and suicide bombings in and around Baghdad — attacks of a type that U.S. intelligence officers see as the work of, as one put it, "imported talent", with Iraqi logistical and intelligence support . This may indicate that the foreign terrorist element was first to pick up the ball and run with it. Car bombings require planning that would make it unlikely they were launched in response to the arrest, but these operations certainly weren't aborted despite increased U.S. security. But the former Ba'athists weighed in, too, with a sophisticated ambush on a U.S. patrol in Samarra, near Tikrit.

Slowing the insurgent momentum

There's no question that Saddam's arrest struck a heavy psychological blow, even though most of the fighters weren't pining for his return to power. His capture has destroyed a sense of infallibility that had begun to take root among the insurgents. Before this, they felt they were on a roll, citing the White House's revising its political plans for Iraq, and mounting discord in the U.S. over the progress of the mission. They see their campaign, after all, as more political than military in nature, knowing they can't defeat the U.S. military on the battlefield, but believing they can do so in middle American living rooms if people tire of the drip feed of casualties in a war without an apparent end. In this sense, Saddam's capture was a major victory for the U.S. and a major defeat for the insurgency on the very turf on which they agree the conflict will be won or lost. The dictator's arrest has certainly swung many doubters in the Middle American living room more decisively behind the mission. The guerrillas also know now, more than ever, that they are vulnerable. If Saddam can be captured, so can anyone. But this sense may pass — indeed, I can already see it ebbing away with the week not yet over.

Among the broad spectrum of insurgents — disaffected and nationalist Iraqis, Fedayeen loyalists, Islamists and foreign jihadis — only a small proportion is likely to be deterred by the capture. The grouping it will hurt most will be the Saddam loyalists, principally the Fedayeen. They were fighting to restore him to power, and their principal goal is now beyond reach. Any flagging of spirits among the resistance will start with these men. But the others — the majority — are driven by motives more diverse and larger than anything connected with Saddam. Some never cared for him (especially the Islamists), or saw him for all his flaws, and they cast their fight in patriotic or religious terms, or a contagion of both. They respected Saddam, or at least recognized him as a rallying point. But that's about all. As one Iraqi cell commander told me during the week, "This hurts, but it's not the kind of hurt that stops your body from moving. It's only a small hurt and we can go on."

From quantity to quality

And if they have the will to fight on, they certainly have the means to do so. Weapons and ammunition are in plentiful supply, and money does not appear to be a concern. The insurgents' resources did not, by and large, depend on Saddam: Although a lot of their money has come from the coffers of the former regime, it has not been Saddam who has controlled the purse strings. The insurgents appear to have access to deep reserves of cash, managed by low-profile regime figures. While Saddam periodically sent cash in symbolic acts of gratitude or inspiration, say resistance figures, the bread and butter of the insurgency has come from Baathist financiers and from the community — donations, tithes, sponsorship by powerful families and clans — and these, according to the insurgents, show no sign of drying up. There may even be an influx of cash fueled by anger in Sunni communities over the U.S. victory.

Overall, the new phase of the conflict is likely to see a decline in the number and frequency of attacks carried out by each cell, as the guerrillas take more care to disguise themselves and protect their operations. But future attacks may be better crafted and targeted to inflict greater damage. As one mujahid told me in a dark field one night this week, "The games are over, this is more serious than ever." The same may hold for the Coalition.

• Michael Ware/Baghdad
• TIME's Michael Ware talks to the Iraqi insurgents about the impact of Saddam's capture on those fighting the U.S.