Quotes of the Day

The tile walls of the holy shrine of Imam Ali in Najaf are riddled with bullets, the marble floors streaked with blood. Inside the gates of the besieged compound last week, members of Muqtada al-Sadr's Mahdi Army slept and patched up their wounds and died. But their determination never faltered, even under the withering firepower of the vastly superior army outside. Haidar, 23, had come to join the fight from his family's house just on the other side of the U.S. cordon encircling the shrine. "I was a history student, but now I have this," he said, waving aloft his Kalashnikov. He said he didn't expect to see his family again. A fighter in the shrine claimed to have seen a vision of the Imam Ali during a power blackout, and soon men sang and chanted and pointed to the balcony. They called for al-Sadr to make an appearance, but their leader never came.

No one is ever quite sure where al-Sadr stands. The rebellious Shi'ite cleric is a master of the mixed message, and last week he flipped so often between vows of violence and offers to negotiate that even when the two-week-old standoff between his Mahdi Army and combined U.S. and Iraqi-government forces seemed about to end, it wasn't clear if it had. Did he really intend to quit the shrine? Or was he actually planning to resume combat, as he later urged his followers, against the enemy forces still poised outside? As one of his spokesmen, Sheik Ahmed al-Shebani, put it, "Tomorrow I don't know what will happen. There could be war. There could be peace."

That's as good a summary as any of the state of play in Iraq today.

Even if the battle for control of the mosque ends in al-Sadr's retreat, the struggle for control of the country is far from over.

Resolution of the standoff in Najaf may help boost the legitimacy of the interim U.S.-backed government and its Prime Minister, Iyad Allawi, among Iraqis fed up with al-Sadr's truculence. And yet the renegade cleric still commands thousands of fervent followers willing to take up arms anytime at his order, and his strident defiance of the U.S. has won him an even greater number of noncombat supporters.

Even an inconclusive truce boosts his stature: as long as the militant cleric gets away to fight another day, rebellion could erupt again.

That's the dilemma that vexes the U.S. and its allies as they try to quell the guerrilla campaign across Iraq that shows few signs of abating. U.S. commanders say they have inflicted punishing blows to al-Sadr's army; the military claims that hundreds of the cleric's fighters have been killed in the fighting in Najaf. But the fear of alienating peaceful Shi'ites forced the Allawi government to hold back from its threats to launch a decisive strike against rebels inside the shrine. And so late last week, even as al-Sadr claimed to be handing over the site to officials loyal to Grand Ayatullah Ali Husaini Sistani, al-Sadr's shock troops remained armed and in control of the streets surrounding it.

Al-Sadr's ability to survive such face-offs may have wider reverberations. Two months after sovereignty was handed over to Iraqis, large swaths of the country are controlled by a flourishing assortment of insurgents. U.S. forces have abdicated power in Fallujah, been chased out of Ramadi and Samarra, and are scrambling to keep hold of Baqubah, Tikrit and Mosul. Even in Baghdad, gunmen have turned areas of the capital into deadly no-go zones. While U.S. and Iraqi officials insist they have the firepower to contain the violence, the agonizing search for a way out in Najaf was the latest reminder that military might isn't enough to pacify the insurgents sufficiently for a homegrown government to take root. "This is not solely about the Iraqi government and Muqtada al-Sadr," says a coalition official in Baghdad. "It has national implications. Armed opponents in other parts of the country are drawing lessons from this."

Since the beginning of the battle with al-Sadr early this month, the Allawi government, backed by the U.S., made clear its determination to prevent Najaf, an ancient city sacred to the country's majority Shi'ites, from becoming a Fallujah-style sanctuary for militants. The Prime Minister may also have chosen to strike at the Mahdi Army in hopes of sending a strong signal to other rebels: Look what happens when you go up against this government. Allawi, widely regarded among Iraqis as little more than a puppet of the U.S., needed to come out on top if his provisional regime was to acquire credibility.

But the trial of strength didn't turn out to be easy at all. A tactical victory at the shrine would rouse wholesale Shi'ite resistance to his government. A decision to back down would destroy Allawi's ability to impose order on insurgents across the country. At the Pentagon, officials were keen to be done with al-Sadr once and for all but acknowledged it would take an unacceptable level of force to do the job. They insisted that they were not calling the shots: any decision to storm the mosque would be Allawi's. The Prime Minister declared that any offensive into the shrine would be carried out by Iraqi forces (backed up, however, by U.S. troops and air power), yet even that possibility posed a no-win dilemma for the U.S. "If the Americans fail to take the shrine, they lose militarily," a Mahdi Army official told Time. "And if they take the shrine, they lose politically." But Al-Sadr knew that as long as his men held the shrine, the advantage was his.

Just by hanging tough, the young cleric muscled his way—without even being there—into the national conference that met last week to name an interim legislature. Delegates who were supposed to focus on participation in the democratic process found their business eclipsed by the crisis in Najaf. A conference delegation trooped there hoping to talk al-Sadr into leaving the shrine and transforming his militia into a political movement, only to be refused an audience with the cleric. The next day, he said he might be willing to comply, then said he would seek "victory or martyrdom," then turned accommodating again.

But Allawi had lost patience with all the tense back and forth. He issued a "final call" for al-Sadr to leave the shrine compound and disband his militia. And for hours that night, U.S. planes dropped bombs, gunships strafed rebel positions near the shrine, and tanks shelled militia hideaways as explosions filled the sky over the Old City with billowing smoke and a deadly orange glow. U.S. military commanders said they were merely "shaping the battlefield" in case a frontal assault was ordered. But al-Sadr is adept at divining when to back down. On Friday he promised to "turn over the keys" of the sacred shrine to representatives of Sistani, the most revered Shi'ite religious leader, who has been out of the country for weeks while receiving cardiac treatment in London. Over the weekend an ambiguous resolution seemed to take hold as al-Sadr's fighters removed weapons from the shrine and the numbers holed up inside dwindled from as many as 2,000 early in the week to a few hundred. But their leader emerged from the fray with much of his militia intact.

U.S. officials and Middle East experts warn that a failure to crush the Mahdi Army will encourage militants across the country to multiply. Other political and ethnic factions have fielded armed militias since the fall of Saddam Hussein, and many wield more authority than Allawi's government. Retired Marine General Anthony Zinni says the Americans who ran Iraq after the invasion are to blame for the unchecked growth of the militias "because they didn't have a clear policy on how to deal with them back when they were easier to put down."

Now the U.S. is running out of options. Military commanders are scrambling to create a viable Iraqi army that can take on insurgents on its own, in the hopes that Iraqis desperate for security will offer native forces the kind of support they have withheld from the occupiers. Yet even U.S. generals agree there is no military solution to the violence. "We're really good at combat operations, killing and breaking things," says Major General Pete Chiarelli, commander of the 1st Cavalry, the Army division responsible for policing Baghdad. "But if all I am doing is this, I will make more enemies than I kill."

It's a vicious circle, he says, and the worst-case scenario, if inconclusive battles like Najaf repeat themselves, is a nationwide popular uprising. The only hedge against that, says British Major General Andrew Graham, deputy commander of the Multinational Corps- Iraq, is to convince the Iraqi people "that there is hope." That, alas, is the hardest thing in the country to find.

• JOHANNA MCGEARY