[House Document 110-58]
[From the U.S. Government Publishing Office]



                                     

110th Congress, 1st Session - - - -  - - - - - - House Document 110-58
 
                    IRAQ BENCHMARK ASSESSMENT REPORT

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 THE SECOND OF TWO REPORTS THAT ASSESSES THE STATUS OF EACH OF THE 18 
   IRAQI BENCHMARKS, CONSISTENT WITH SECTION 1314 OF THE U.S. TROOP 
 READINESS, VETERANS' CARE, KATRINA RECOVERY, AND IRAQ ACCOUNTABILITY 
               APPROPRIATIONS ACT OF 2007, PUB. L. 110-28




 September 17, 2007.--Message and accompanying papers referred to the 
  Committee on Foreign Affairs and Armed Services, and ordered to be 
                                printed
To the Congress of the United States:
    Consistent with section 1314 of the U.S. Troop Readiness, 
Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007 (Public Law 110-28) (the ``Act''), 
attached is a report that assesses the status of each of the 18 
Iraqi benchmarks contained in the Act and declares whether 
satisfactory progress toward meeting these benchmarks is, or is 
not, being achieved.
    The second of two reports submitted consistent with the 
Act, it has been prepared in consultation with the Secretaries 
of State and Defense; the Commander, Multi-National Force-Iraq; 
the United States Ambassador to Iraq; and the Commander, United 
States Central Command.

                                                    George W. Bush.
    The White House, September 14, 2007.

            Benchmark Assessment Report--September 14, 2007

    This report is submitted consistent with Section 1314 of 
the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and 
Iraq Accountability Appropriations Act, 2007 (Public Law 110-
28) (the ``Act''). It includes an assessment of how the 
sovereign Government of Iraq is performing in its efforts to 
achieve a series of specific benchmarks contained in the Act, 
as well as any adjustments to strategy that may be warranted in 
light of that performance. This is the second of two reports to 
be submitted consistent with the Act and has been prepared in 
consultation with the Secretaries of State and Defense; 
Commander, Multi-National Force-Iraq; the United States 
Ambassador to Iraq; and the Commander, United States Central 
Command, consistent with Section 1314(b)(2)(B) of the Act. This 
assessment complements other reports and information about Iraq 
provided to the Congress and is not intended as a single source 
of all information about the combined efforts or the future 
strategy of the United States, its Coalition Partners, or Iraq.
Introduction
    Section 1314 of the Act states that the President is to 
submit to Congress two reports assessing the status of each of 
the 18 benchmarks contained in the Act and declaring whether, 
in the President's judgment, satisfactory progress is being 
achieved with respect to those 18 benchmarks. These benchmarks 
relate to Government of Iraq actions believed to be important 
to advance reconciliation within Iraqi society, to improve the 
security of the Iraqi population, to provide essential services 
to the population, and to promote its economic well-being. 
Iraqi Government efforts to achieve these benchmarks complement 
other U.S. and Iraqi collaborative actions as part of the New 
Way Forward.
Current U.S. strategy: New Way Forward
    Current U.S. strategy--the New Way Forward--recognizes that 
the fulfillment of commitments by both the U.S. and Iraqi 
Governments will be necessary to achieving our common goal: a 
democratic Iraq that can govern, defend, and sustain itself and 
be an ally in the War on Terror. The building of a strong 
strategic partnership with the Iraqi Government will be an 
important part of the effort to achieve this end state, which 
remains a long-term goal, and requires the application of all 
elements of national power, including especially diplomatic, 
economic, political, and military power.
    Our overarching strategy continues to emphasize a 
transition of responsibility to the Iraqi Government and its 
security forces. The New Way Forward recognized that, in 
response to the upsurge in sectarian violence in 2006, it was 
necessary for Coalition Forces to temporarily play a greater 
role, in conjunction with the Iraqi Security Forces, in 
securing the Iraqi population. This is not meant to replace 
Iraqi efforts to provide security but to help provide the 
necessary time and space with which the Iraqi Government can 
continue to build its own capacity; can intensify efforts 
against the accelerants of the violence, especially al-Qaida in 
Iraq (AQI) and some segments of the Jaysh al-Mahdi (JAM); and 
can meaningfully address the all-important issue of 
reconciliation among the various segments of Iraqi society. The 
strategy recognizes that the levels of violence seen in 2006 
undermined efforts to achieve political reconciliation by 
fueling sectarian tensions, emboldening extremists, and 
discrediting the Coalition and the Iraqi Government. Amid such 
violence, it became significantly harder for Iraqi leaders to 
make the difficult compromises necessary to foster 
reconciliation.
    At the same time, we have increased our efforts to help 
build the capacity of the Iraqi Security Forces (ISF). Relying 
on lessons learned from our experience in training and 
equipping the ISF, we have significantly enhanced our training 
and mentoring commitment. We will continue this commitment 
through a combination of partnering Coalition units with Iraqi 
Army and Police organizations and embedding transition team 
personnel with the majority of ISF units. U.S. commanders are 
committed to helping the Iraqi government expand the size of 
the ISF to make it a more capable counterinsurgency force.
    We are also increasing our efforts to build Iraqi 
governmental capacity not just at the national level, but at 
the provincial and local levels as well. Most notably, this has 
required an expansion of our Provincial Reconstruction Team 
(PRT) program with 15 new civilian PRTs paired with Brigade 
Combat Teams (BCTs), and giving PRT leaders and BCT commanders 
additional authorities, resources, and personnel. These leaders 
are charged with supporting moderate elements against 
extremists in their areas of responsibility and launching 
projects that have an immediate impact in areas cleared of 
terrorists and insurgents.
    As the President explained in January, all of these 
efforts, together with a new diplomatic offensive in the 
region, are designed to set the conditions for U.S. troops to 
begin coming home, without risking a humanitarian catastrophe 
in Iraq, sanctuaries for international terrorist networks, or a 
broader regional conflict that would threaten U.S. national 
security interests for generations. (The strategy is explained 
in greater detail at http://www. whitehouse.gov/nsc/iraq/2007/
iraq-strategyqv011007.pdf). While all of those conditions have 
not yet been met, and the new strategy is still in its early 
stages, there are encouraging signs that point the way to a 
more normalized and sustainable level of U.S. engagement in 
Iraq--with a decreasing number of U.S. combat forces 
increasingly focused on a core set of tasks, such as 
counterterrorism operations, and training, equipping, and 
supporting Iraqi forces.
The next phase: Building on success
    In the coming months, the United States will continue to 
operate along four lines of operation--security, political, 
economic, and diplomatic--to advance our objectives 
ofprotecting the Iraqi population while degrading terrorist and 
extremist networks; advancing local and national reconciliation; 
setting the framework for a growing economy; and expanding 
international support for Iraq. On the security side, General Petraeus 
has recommended to the President, and the President has accepted, that 
beginning in December 2007, we can transition to the next phase of our 
strategy. During this phase, U.S. forces will gradually transition from 
surge operations and transfer responsibility for population security to 
Iraqi forces--but only in a manner that preserves security and builds 
on success. Any adjustments in the missions of U.S. forces or 
transitions to Iraqi forces will vary based on local conditions. This 
approach stresses the need to continue the counterinsurgency strategy 
incorporated in the New Way Forward--but with Iraqis increasingly 
shouldering more of the load.
    In this next phase and based on the Government of Iraq's 
request, we will also begin to develop the framework for an 
enduring relationship between Iraq and the United States--based 
on common principles. Iraqi leaders from all communities share 
the vision for a reduced American presence as soon as 
conditions allow and in a manner that sustains the gains seen 
over the course of 2007. They also understand that their 
success requires U.S. political, economic, diplomatic, and 
security engagement beyond January 2009, and they have asked to 
begin defining a long-term relationship between our two 
countries. We anticipate that the elements of this relationship 
will set the foundation for an enduring American commitment to 
Iraq--encompassing strong security, economic, and diplomatic 
ties--which is in the mutual interests of both the Iraqi people 
and the American people.
    As part of the next phase in our strategy, the President 
has directed General Petraeus and Ambassador Crocker to update 
their joint operation plan for Iraq and to adjust our military 
and civilian resources accordingly. The President has also 
directed General Petraeus and Ambassador Crocker to provide a 
fresh assessment to the American people and to the Congress in 
March 2008 on the situation in Iraq and any adjustments that 
may be needed to our strategy based on changing conditions. 
This assessment will address:
           An analysis of mission progress--including 
        security, economic, diplomatic, and political--from 
        September 15, 2007;
           Recommended adjustments to military 
        resources in Iraq, including further force adjustments;
           Recommended adjustments to economic 
        assistance for Iraq, including a status report on the 
        performance of Provincial Reconstruction Teams and 
        governmental capacity-building programs;
           An assessment of regional and international 
        contributions to Iraq and efforts to enhance those 
        contributions;
           An assessment of ``bottom-up'' political and 
        security initiatives, and whether the national 
        government is supporting them;
           An assessment of ``top-down'' political and 
        security initiatives, including national reconciliation 
        initiatives; and
           An assessment of institutional adjustments 
        within the United States Government to better support 
        the civilian and military missions in Iraq as we 
        transition to a longer-term posture.
    The opening statements of General Petraeus and Ambassador 
Crocker--as delivered to the Congress on September 10 and 
September 11, 2007--are attached to this report as Appendices 1 
and 2. These documents provide additional detail on the 
situation in Iraq as assessed by our experts on the ground and 
elements of the next phase of our strategy.

Summary of achievements and shortfalls

    This report provides, consistent with the Act, an 
assessment of how the Iraqi Government is performing on 18 
specified benchmarks, rather than the effects being generated. 
Some of the benchmarks may be leading indicators, giving some 
sense of future trends; but many are more accurately 
characterized as lagging indicators, and will only be achieved 
after the strategy is fully underway and generates improved 
conditions on the ground. Still other benchmarks do not fully 
measure the political accommodations that actually affect 
violence in Iraq and the direction that country is headed. For 
example, local political accommodations have dramatically 
improved conditions in what had been some of Iraq's most 
violent areas, and we are deploying our resources to help 
ensure that these trends continue and spread. It will take 
time, however, for improved conditions locally to translate 
into broader political accommodations at the national level; 
what is important is the overall trajectory, which, under our 
present strategy, has begun to stabilize and turn upward, 
compared to the deteriorating trajectory seen over the course 
of 2006. Thus, the assessments in this report should be viewed 
in a larger context: the discussion below provides a snapshot 
of achievements and shortfalls that can round out the picture 
given in the detailed assessment section of this report.
    Security: Iraq faces daunting challenges: a complex 
security situation whose main elements include a communal 
struggle for power and resources between the Shi'a majority and 
Sunni, Kurd, and other minorities. Al-Qaida in Iraq extremists 
continue to act as accelerants for ethno-sectarian violence, 
and Iranian lethal support to Shi'a militants clearly 
intensifies the conflict. Foreign support to extremists in Iraq 
continues to exacerbate the security challenges and frustrate 
efforts to encourage political reconciliation.
    The tempo of military actions to defeat al-Qaida increased 
in June as the final U.S. surge brigades arrived in Iraq. The 
surge effort has been complemented by carefully selected 
counter-terrorist targeting of key leaders of al-Qaida and 
other extremist groups. Tribal-based anti-terrorist initiatives 
have also augmented Coalition efforts to combat al-Qaida. 
Coalition efforts to secure the population against al-Qaida and 
other terrorists and extremists in Baghdad and other provinces 
across Iraq show signs of progress, but much hard work and 
tough fighting remain. Al-Qaida and Iranian-supported extremist 
groups have not been defeated, though we have made strong 
progress.
    The number of attacks on Coalition forces has been on a 
downward trend since the middle of June. High-profile attacks 
(by car bombs, suicide car bombs, and suicide vests) have 
declined by over one-third since March of 2007. Coalition and 
Iraqi forces, along with Iraqi tribal elements, have pushed al-
Qaida out of several former safe havens. Coalition forces have 
killed or captured nearly 100 key leaders and over 2,500 rank 
and file al-Qaida members in the past 7 months. As a result, 
al-Qaida's ability to coordinate its activities and conduct 
simultaneous attacks in multiple regions has been reduced. 
Nonetheless, sporadic high-profile attacks by al-Qaida continue 
to cause high civilian casualties, demonstrating al-Qaida's 
intent to use civilian casualties to provoke additional 
sectarian violence, shape public opinion, and destabilize the 
Government of Iraq.
    Coalition forces report that murders and executions 
assessed to be ethno-sectarian in nature have declined 
significantly both in Baghdad and nationwide from their high in 
December 2006. However, the increase in ethno-sectarian deaths 
in July and August of 2007--largely a function of three sizable 
car bomb attacks in Kirkuk and Ninewa provinces--demonstrates 
the challenge that ethno-sectarian violence continues to pose 
for Iraq, particularly in rural locations that have light 
security force presence.
    Sunni tribal groups have turned against al-Qaida in al-
Anbar and Diyala provinces as well as in the Baghdad-area 
neighborhoods of Ameriyah, Abu Ghraib, Adhamiya, and Arab 
Jabour. They are cooperating with Coalition and Iraqi forces in 
expelling al-Qaida from their areas. Attacks in al-Anbar are 
now less than one-quarter the rate in January, and al-Qaida's 
sanctuaries have been greatly reduced. The trend of tribal 
engagement with the Coalition and the Government of Iraq 
continues to expand to other areas of Iraq. More than 40,000 
concerned Iraqi citizens have volunteered to support local 
security initiatives since the start of the surge--and that 
number is growing daily. Prime Minister Maliki is personally 
involved in decisions to reconcile with these Sunni tribes and 
citizens willing to fight al-Qaida. He has directed the 
Government of Iraq to take steps to incorporate them into local 
security forces--a clear demonstration of the potential of 
``bottom-up'' reconciliation that has occurred since January 
2007. In fact, Prime Minister Maliki recently approved hiring 
approximately 12,000 Sunnis in al-Anbar, and 1,735 local men--
including former insurgents--in Abu Ghraib. These events 
illustrate the growing sense among Iraqis that they need to 
overcome their natural trepidation and make some form of 
accommodation with former opponents.
    Iran continues to supply Shi'a extremist groups with 
training, funding, and weapons, including rockets, mortars, and 
particularly explosively-formed projectile devices, which 
account for an increasing percentage of U.S. combat deaths. 
Coalition and Iraqi operations against these groups, combined 
with a growing rejection of Shi'a violence by top Government of 
Iraq officials, have led to some progress in reducing violent 
attacks from Shi'a extremists.
    The Iraqi Security Forces (ISF) continue to make progress, 
but development of their capabilities in some areas has been 
slower than hoped. Progress by the Iraqi Army has exceeded that 
of both the national and local police. ISF performance has 
generally met or exceeded expectations when units are partnered 
with Coalition forces in combined operations or in tactical 
overwatch--a potential model for the future. There are still 
challenges in developing Iraqi institutions to sustain existing 
forces, delays in obtaining required equipment, persistent 
ethno-sectarian influences and political interference, a 
limited pool of trained officers and non-commissioned officers 
(NCOs), and attrition from combat. The Prime Minister's 
initiative to expand the ISF will eventually provide additional 
necessary forces, but the expansion will further strain the 
institutions that develop, train, and equip Iraqi forces. 
Despite these challenges, the ISF are increasingly engaged in 
providing security for the Iraqi population. They are in the 
fight. Over the last 18 months Iraqi forces suffered combat 
deaths three times the number of combat deaths of Coalition 
forces. We have been further encouraged by the recent downturn 
in anti-Coalition attacks in Baghdad and southern Iraq since 
the early September announcement of a stand-down in Jaysh al-
Mahdi (JAM) operations. Time will tell whether this has a 
lasting effect.
    Political Reconciliation: Reconciliation in a society 
marked by nearly four decades of dictatorship will not be 
linear and will take time, patience, and support from the 
international community. The Iraqi leadership (and the United 
States) has sought to set a metric for national reconciliation 
through a series of laws to be enacted through Iraq's Council 
of Representatives. Moving these laws forward depends on deal-
making among major players in a society divided along 
sectarian, ethnic, and other lines--and navigation of a nascent 
democratic system with checks and balances that, while 
protecting minority groups, also slows legislative progress. 
For these reasons, most of the major political benchmarks 
identified in the Act may prove to be lagging indicators of 
whether or not the strategy is succeeding.
    While key national legislation has not yet passed, the 
objectives of such laws are in some ways already being 
achieved. For example: there is no revenue sharing law, and yet 
significant oil revenues are being distributed by the central 
government to the provinces in an equitable manner. There is no 
provincial powers law, and yet the provincial governors and 
councils are making decisions on budget expenditures through 
engagement with the central government and ministries and are 
providing essential services for their constituents. There is 
no amnesty law, and yet immunity is being granted to many 
former insurgents, who in turn are being recruited to join 
legitimate security institutions. There is no de-
Ba'athification reform law, and yet more than 45,000 former 
Ba'athist members of the old armed services have been granted 
pensions or even restored to active duty or Iraqi government 
service. Amnesty or de-Ba'athification laws were assumed 
necessary to drive a wedge between nationalist elements of the 
largely Sunni insurgency and al-Qaida. In fact, Sunnis in 
record numbers are turning against al-Qaida, reclaiming their 
communities, and turning towards the central government for 
additional resources. These are precisely the ``effects'' the 
benchmarks were intended to produce, even if the formal 
benchmarks themselves have not been met. In the coming months, 
our strategy will increasingly focus on helping the Iraqis knit 
together this new ``bottom-up'' progress with the ``top-down'' 
political process. It will still remain vital for Iraq's 
national government to codify what is happening in practice 
through formal legislation over time.
    On that point, political progress at the national level has 
still been disappointing. The natural tension between groups 
has been exacerbated by political blocs threatening to withdraw 
support from the government. These threats were not fully 
carried out in most cases, but they have contributed to an 
environment of mistrust and gridlock. It became clear in July 
that the fundamental problem at the national level was not the 
failure to pass legislation but that the principal political 
groups--Sunni, Shi'a, and Kurd--could not agree on a set of 
decision-making processes and power sharing arrangements. 
Consequently, Iraq's leadership (represented by the Prime 
Minister, Presidency Council, and the President of the Kurdish 
Region) met in Baghdad in August to address these more 
fundamental issues of executive branch decision-making.
    These leaders on August 26--following 8 days of meetings--
announced a basic agreement on key benchmarks legislation on 
provincial powers and de-Ba'athification. They also formalized 
the use of the ``3 plus 1 group'', or the Prime Minister and 
the three-member Presidency Council, for collective decision-
making on sensitive and strategic matters. The leaders agreed 
to streamline executive branch activities to facilitate swift 
decision-making through an ``inner-cabinet'' consisting of core 
ministers, including Oil, Electricity, Defense, and Interior. 
And, for the first time, they ``affirmed the necessity of a 
long-term relationship with the United States'' based on common 
interests for the future of Iraq. The communique issued by 
these leaders has not solved Iraq's serious problems at the 
national level, but it does represent an important step forward 
in the ongoing struggle to overcome the fear and mistrust now 
dividing Iraq's ethnic and religious communities. The leaders' 
August 26 agreement is a necessary building block to meaningful 
political progress--which begins with all major communities 
coming together for dialogue on resolving key differences.
    Diplomatic Engagement: Since the interim Benchmarks report 
in mid-July, there has been significant diplomatic activity 
with a focus on working with Iraq's neighbors to address 
problems in Iraq, especially security problems. In late July, 
after two trilateral meetings at the ambassador level, the 
United States, Iraq, and Iran formed a Security Subcommittee 
which met for the first time on August 6, 2007 in Baghdad. The 
Security Subcommittee has focused on curtailing the activities 
of militias and foreign terrorists in Iraq and developing ways 
to increase control over Iraq's borders. Despite these efforts, 
the Iranian government has shown no signs of curtailing their 
destructive activities inside Iraq--including the direct 
provision of lethal munitions and training to Shi'a extremist 
groups that are attacking Coalition forces and Iraqis. Indeed, 
attacks by the most dangerous roadside bombs--explosively-
formed projectiles (EFPs)--have been on an upward trajectory 
this year, reaching a high of more than 90 attacks in July.
    We have encouraged the Government of Iraq to engage in 
discussions with the Government of Syria to express its serious 
concerns about foreign terrorists, especially suicide bombers. 
In early August, the United States participated in a Border 
Security Working Group meeting in Damascus as part of the 
Neighbors Process. The participants discussed the issue of 
foreign terrorists continuing to use neighboring territories as 
a main transit route to Iraq and agreed to establish an 
experts' group to work on specific border control measures. 
Prime Minister Maliki followed up with a separate visit to 
Syria later in August, during which the Syrian Government 
committed to implementing border control measures. Although 
there has been some improvement, it remains too early to 
determine whether these Syrian actions have been effective in 
reducing foreign fighter flows into Iraq, which account for 
many of the high-profile terrorist attacks in Iraq aimed at 
instigating sectarian violence. Moreover, Syria continues to 
provide safe-haven to Ba'athist insurgents and financiers, and 
may be providing support to extremist political elements who 
are opposed to political reconciliation.
    In addition to his visit to Syria, Prime Minister Maliki 
traveled to Turkey and Iran in August 2007 for discussions on 
security, energy, and other bilateral issues. Several other 
senior Iraqi government officials have traveled in the region 
as Iraq continues to increase its economic and diplomatic 
relations with neighboring states. For the first time in years, 
Iraq is exporting oil through Turkey. Iraq is nearing agreement 
on a commercial deal for Kuwait to supply critically needed 
diesel fuel. Jordan issued a statement welcoming the Iraqi 
leaders August 26 communique. Saudi Arabia is planning to open 
an Embassy in Baghdad--its first since the fall of Saddam.
    The International Compact with Iraq, an initiative jointly 
sponsored by the United Nations and the Government of Iraq, was 
signed on May 3, 2007 in Sharm el-Sheikh, Egypt. The following 
day the Expanded Neighbors ministerial conference took place 
and was attended by the Permanent Five members of the U.N. 
Security Council, the Arab League, the Organization of Islamic 
Conference, and the G-8. Both events helped provide more 
international and regional support for Iraq. Plans are underway 
to create a standing secretariat for the Neighbors Process and 
a second ministerial-level conference is scheduled for late 
October in Turkey.
    On August 10, the United Nations Security Council 
unanimously adopted UNSCR 1770, extending the mandate of the 
United Nations Assistance Mission for Iraq (UNAMI). The renewed 
UNAMI mandate provides an expanded role for the U.N. in 
advising, supporting, and assisting the Government of Iraq. 
UNAMI is also empowered to assist in the provisions for 
resolving disputed internal borders.
    These international developments may appear independent of 
one another, but they are in fact part of an interrelated 
effort to establish a new international framework for 
supporting Iraq. This framework will take time to develop and 
mature, but its three primary components--the Expanded 
Neighbors Process, the International Compact, and the expanded 
Security Council mandate for UNAMI--provide promising new 
platforms for drawing the international community closer to 
Iraq with the full support and assistance of the Iraqi 
government.
    Economics and Essential Services: The economic picture in 
Iraq continues to improve, though very significant challenges 
remain. Key macroeconomic indicators paint a modestly improved 
picture--non-oil real growth is projected to be 5 percent in 
2007, non-fuel inflation has further abated (year-on-year core 
inflation has declined to 16 percent and overall inflation to 
30 percent in July 2007, while 2007 year-to-date inflationis 5 
percent), and the unemployment rate appears to be easing. Government 
revenue remains above target due to high oil export prices.
    A national investment commission head has been appointed to 
promote increased private sector activity and legal and 
regulatory reform. Idle yet viable state-owned factories have 
signed loan agreements to restart operations. Reopening these 
factories will create new private business opportunities for 
suppliers located near the factories. An auction of the cell 
phone spectrum in August netted the Government of Iraq a 
better-than-expected sum of $3.75 billion. However, lack of 
adequate security remains the largest impediment to increased 
private economic activity, and a major economic turnaround 
remains unlikely until the security picture improves.
    The provision of essential services at the provincial level 
is generally improving. However, provincial government 
performance remains mixed, with those provinces experiencing 
continued violence and kinetic operations finding it more 
difficult to provide services. On average, the provinces are 
obligating funding for essential services and infrastructure 
projects at a rate faster than in 2006. The improvements are 
most dramatic in provinces such as al-Anbar, where security 
gains have, for the first time since 2003 created an 
environment conducive to delivery of government services. At 
the national level, the Ministry of Oil has finally begun the 
process of investment spending, but much higher rates of 
investment are still necessary to promote growth, fund future 
investment, and contribute to better quality of life.
    Iraq has maintained satisfactory performance on its 
International Monetary Fund (IMF) Stand-by Arrangement. The IMF 
Executive Board completed a successful review of the program on 
August 1 and extended the program until December 2007. IMF 
Executive Board members praised the Iraqi authorities for their 
commitment to implementing difficult economic reforms in a 
dynamic political and security environment. Iraq will negotiate 
a new program with the IMF before the end of the year.
    The Government of Iraq remains similarly committed to the 
International Compact with Iraq, which provides a reform 
framework for Iraq to become financially self-sufficient within 
5 years. A semiannual review of the Compact occurred at the 
U.N. on July 20, during which Iraq presented a report on key 
developments since the Compact was signed on May 3, 2007. Of 
Iraq's 262 actionable benchmarks under the Compact, 169 are in 
progress and on track. Delegates from the international 
community praised the report and welcomed Iraq's efforts to 
implement its reform commitments. Several participants also 
called for greater assistance for Iraq, especially through 
faster progress on concluding debt relief agreements.

Congressional benchmarks

    Broad context is necessary for assessing the performance of 
the Iraqi government with respect to the 18 benchmarks 
identified in the Act. Iraqi leaders face a daunting challenge, 
and they and their families take great risks daily. We continue 
to encourage and press them to achieve established benchmarks, 
since we believe that those efforts will contribute over time 
to Iraq's stability, to its ability to provide for its own 
security, and to the international effort to counter violent 
extremism. Nonetheless, our efforts in Iraq extend far beyond 
these benchmarks, as the recent testimony of Ambassador Crocker 
and General Petraeus explained in more detail. Every day, our 
Embassy and military officials work with the Iraqis to 
establish the strategic environment in which security and 
meaningful reconciliation can develop and take root--in ways 
not easily measured by benchmarks based heavily on adopting 
legislation.
    Standard of Measurement: Section 1314(b)(2)(A) states: 
``The President shall submit an initial report to Congress, not 
later than July 15, 2007, assessing the status of each of the 
specific benchmarks established above, and declaring, in his 
judgment, whether satisfactory progress toward meeting these 
benchmarks is, or is not, being achieved.'' Section 
1314(b)(2)(D) further provides that ``[t]he President shall 
submit a second report to the Congress, not later than 
September 15, 2007, following the same procedures and criteria 
outlined [in the paragraphs] above.''
    To make this judgment (i.e., whether ``satisfactory 
progress * * * is, or is not, being achieved''), we have 
carefully examined all the facts and circumstances with respect 
to each of the 18 benchmarks and asked the following question: 
As measured from a January 2007 baseline, do we assess that 
present trend data demonstrate a positive trajectory, which is 
tracking toward satisfactory accomplishment in the near term? 
If the answer is yes, we have provided a ``Satisfactory'' 
assessment; if the answer is no, the assessment is ``Not 
Satisfactory.'' Where benchmarks contain more than one element 
we have provided assessments for each element. As a result, 
some benchmarks show mixed progress, with some elements 
assessed satisfactory and other elements judged not 
satisfactory. Two benchmarks could not be fully assessed at 
this time because the preconditions for achieving them have not 
been reached. For benchmarks receiving a not satisfactory 
assessment, we have explained what, if any, strategic 
adjustments may be required to improve the present trajectory.
    The current assessment indicates additional progress has 
occurred since the initial report of July 2007. In that report, 
the Iraq government made satisfactory progress on eight 
benchmarks and eight benchmarks were assessed as 
unsatisfactory, including two with mixed progress. Today's 
report is based on data available as of September 1 and 
reflects that the Iraqis have made satisfactory progress since 
January 2007 on nine benchmarks, including on de-
Ba'athification reform which in July was assessed as 
unsatisfactory. In addition, while the current report assesses 
seven benchmarks as not satisfactory, this includes four 
benchmarks with progress on some aspects while not on others. 
In both the July report and today's assessment, two benchmarks 
are not rated because the necessary preconditions are not yet 
present.
    It is important to note that the metric used in this report 
differs from that employed by the Government Accountability 
Office (GAO) in its August 2007 report. Legislation mandating 
this GAO report required a determination of whether or not the 
Government of Iraq has met or not met each benchmark and the 
status of achievement of these benchmarks. Additionally, the 
GAO report took account of information only through July 31, 
2007. This report takes account of information through 
September 1, 2007 and evaluates whether the Iraqi government 
has made satisfactory progress on each benchmark.
    The present analysis and assessment of the 18 benchmarks 
follows.
                      Assessment of the Benchmarks

    Section 1314 (b)(2)(A) The President shall submit an 
initial report, in classified and unclassified format, to the 
Congress, not later than July 15, 2007, assessing the status of 
each of the specific benchmarks * * * and declaring, in his 
judgment, whether satisfactory progress toward meeting these 
benchmarks is, or is not, being achieved.
    Section 1314 (b)(2)(C) If the President's assessment of any 
of the specific benchmarks established above is unsatisfactory, 
the President shall include in that report a description of 
such revisions to the political, economic, regional, and 
military components of the strategy, as announced by the 
President on January 10, 2007. In addition, the President shall 
include in the report the advisability of implementing such 
aspects of the bipartisan Iraq Study Group, as he deems 
appropriate.
    Section 1314 (b)(2)(D) The President shall submit a second 
report to the Congress, not later than September 15, 2007, 
following the same procedures and criteria outlined above.
    Section 1314 (b)(I)(A) The United States Strategy in Iraq, 
hereafter, shall be conditioned on the Iraqi Government meeting 
benchmarks * * * including:
    (i) Forming a Constitutional Review Committee and then 
completing the constitutional review.
    The Council of Representatives (COR) formed the 
Constitutional Review Committee (CRC) on November 15, 2006, and 
constitutional review is underway. The CRC, in a May 2007 
interim report, offered a range of amendments for COR 
consideration and in addition highlighted the need to resolve 
outstanding issues concerning: (i) Presidential powers, (ii) 
the powers of the regions vs. the central government, and (iii) 
the status of Kirkuk (Article 140 of the Constitution).
    Assessment: The Government of Iraq has made satisfactory 
progress toward forming a Constitutional Review Committee (CRC) 
and then completing the constitutional review. The Embassy has 
engaged the CRC Chairman and the COR Speaker and Deputy 
Speakers on the need to develop a well-defined plan for the COR 
debate on the recommendations of the interim report. Despite 
the COR's August adjournment, the CRC continued to work on the 
three additional unresolved constitutional issues described 
above.
    (ii) Enacting and implementing legislation on de-
Ba'athification reform.
    De-Ba'athification reform is potentially the most emotional 
issue being discussed by the Government of Iraq. Legislation 
necessary to reform and implement certain de-Ba'athification 
programs involves competing concepts of justice, 
accountability, reconciliation, and economic compensation. The 
public discussion of these issues tends to polarize Iraqis even 
as many of the proposed changes take place on the ground. For 
example, former Ba'ath party members who served in the army 
have been granted pensions. While the de-Ba'athification 
legislation is debated at the highest levels in Baghdad, more 
than 45,000 former army personnel have been granted pensions or 
reinstated to active duty.
    In Recommendation 27, the Iraq Study Group emphasizes the 
need for United States Government support of reintegration of 
former Ba'athists and Arab nationalists into civic life, and 
the New Way Forward strategy makes de-Ba'athification reform an 
integral part of the United States Government's Iraq policy. 
The Embassy has pressed hard on all political elements to move 
forward.
    On August 26 the leaders of Iraq's five major political 
groups announced an agreement had been reached on, inter alia, 
draft de-Ba'athification legislation. While the agreed-upon 
draft still must pass the hurdles of debate and adoption in the 
Council of Representatives, the work accomplished by the 
leaders on this legislation is a significant sign of progress.
    Even in the absence of legislation, limited political 
accommodation remains possible, particularly when pursued 
through outreach by local political leaders.
    Assessment: The Government of Iraq has made satisfactory 
progress toward enacting and implementing legislation on de-
Ba'athification reform. The fact that legislation has not yet 
passed the COR should not diminish the significance of the 
agreement reached by the leaders or the re-integration of 
former Ba'athists taking place on the ground. The overarching 
goal of de-Ba'athification reform is political accommodation 
between the Shi'a and Sunni communities. The leaders' agreement 
combined with the return of former Ba'athists to civic life is 
a significant step in that regard. Debate on this draft law in 
the COR is an integral part of developing the broad political 
acceptance needed to promote real reconciliation.
    (iii) Enacting and implementing legislation to ensure the 
equitable distribution of hydrocarbon resources to the people 
of Iraq without regard to the sect or ethnicity of recipients, 
and enacting and implementing legislation to ensure that the 
energy resources of Iraq benefit Sunni Arabs, Shi'a Arabs, 
Kurds, and other Iraqi citizens in an equitable manner.
    The Hydrocarbon Framework Law and the companion Revenue 
Sharing Law are fundamentally important to defining federalism 
in Iraq. If adopted, they would: catalyze new sources of 
investment capital and technology for the oil and gas sector; 
facilitate substantial near term increases in government 
revenues which could be used for the benefit of Iraq's people; 
and serve as a vehicle for political reconciliation between 
regions and communities.
    Iraq's political leaders continue to be actively engaged in 
developing these laws.
    The United States has provided technical advice, both to 
the Government of Iraq and to the Kurdish Regional Government 
(KRG), and has encouraged all parties to approve the draft laws 
and submit them for consideration to the full COR.
    The Hydrocarbon Framework Law was approved by the Council 
of Ministers in February 2007 and reviewed by the Shura Council 
(a legal body) in the spring. Two versions of the law were 
submitted to the COR in July. The companion Revenue Management 
Law was agreed to by Kurdish and Shi'a Arab political parties 
in June 2007 and in July was submitted to the Shura Council for 
review. The Revenue Management Law must be approved by the 
Council of Ministers (COM) before submission to the COR. 
Discussions among Iraqi political leaders are ongoing, and this 
legislation remains a primary focus for political party 
leaders.
    Assessment: The Government of Iraq has not made 
satisfactory progress toward enacting and implementing 
legislation to ensure the equitable distribution of hydrocarbon 
revenue. Passage of the national laws remains a high priority 
for the United States and the Government of Iraq and could be 
accomplished relatively quickly if a consensus in support can 
be constructed. Many Sunni leaders (and some Shi'a as well) 
continue to disagree on the appropriate balance between 
national and regional control of hydrocarbon exploration and 
production. Meanwhile, the Kurdish Regional Government has 
sought to reinforce its own position on the national law by 
passing a new hydrocarbons licensing regime through its 
regional parliament. Given the fluid nature of the Iraqi 
political process, it is difficult to predict what further 
progress might occur once the COR reconvenes. Despite this 
uncertainty, the Government of Iraq is already distributing 
significant oil revenue on an equitable basis to the provinces 
and KRG through the Iraqi budget.
    (iv) Enacting and implementing legislation on procedures to 
form semi-autonomous regions.
    In line with the Iraqi constitution, the COR enacted a 
``Regions Law'' in October 2006 that establishes procedures for 
the formation of federal regions in Iraq. The legislation 
delayed the effective date of implementation for a period of 18 
months after enactment, which means no steps can be taken to 
form federal regions before April 2008. The United States 
Government encouraged Iraqi political parties to reach a 
compromise on this law and believes that the 18-month delay in 
implementation was in the interests of Iraq and the United 
States, given current political conditions in Iraq.
    Assessment: The Government of Iraq has made satisfactory 
progress toward enacting and implementing legislation on 
procedures to form semi-autonomous regions. The COR passed the 
Regions Law with a delayed effective date. Implementation of 
this legislation could take place after provincial elections 
are held and after the passage of an updated elections law.
    (v) Enacting and implementing legislation establishing an 
Independent High Electoral Commission, provincial elections 
law, provincial council authorities, and a date for provincial 
elections.
    On January 23, 2007, the COR passed the Independent High 
Electoral Commission (IHEC) Law, which the Presidency Council 
(the President and two Deputy Presidents) signed into law on 
February 27, 2007. On April 28, 2007, the COR appointed the 
nine IHEC Commissioners in a process that the U.N. deemed fair 
and transparent. The Commissioners have completed appropriate 
training and are in the process of selecting representatives to 
oversee elections in the provinces.
    The mid-August high-level meetings produced agreement among 
the leaders of Iraq's five major parties on a draft law 
delineating provincial powers. Draft legislation is expected to 
be submitted to the COR shortly. This law lays out the 
authorities of provincial governments and their relationship to 
the national government in Baghdad.
    In Recommendation 29, the Iraq Study Group emphasizes the 
need for provincial elections at the earliest possible date. 
Iraqi officials said in August that a provincial powers law was 
a prerequisite for setting a date for provincial elections, and 
therefore they await movement from the COR. The United States 
Government and the United Nations Assistance Mission for Iraq 
(UNAMI) are strongly encouraging the Government of Iraq to set 
a date for provincial elections. Additionally, the United 
States Government is working with Iraq Security Forces to 
ensure that they are adequately prepared to provide security 
for free and fair elections when a date is set.
    Assessment: There are multiple components to this 
benchmark, each deserving its own assessment.
     Establishing the IHEC Commission: The Government 
of Iraq has made satisfactory progress toward establishing an 
IHEC Commission.
     Elections Law: The Government of Iraq has not made 
satisfactory progress toward establishing a provincial 
elections law.
     Provincial Council Authorities: The Government of 
Iraq has made satisfactory progress toward establishing 
provincial council authorities, which are encapsulated in the 
Provincial Powers law.
     Provincial Elections Date: The Government of Iraq 
has not made satisfactory progress toward establishing a date 
for provincial elections.
    There remains no mechanism to address the marked under-
representation of Sunnis on four provincial councils. 
Nevertheless, in some places, such as al-Anbar, local 
authorities appointed additional provincial council members in 
November 2006 to ease problems of a lack of representation 
through non-electoral means. In passing an expanded mandate for 
UNAMI on August 10, the United Nations Security Council 
reaffirmed its commitment to assist the IHEC prepare for the 
next round of elections. This situation does not necessitate a 
revision to our current plan and strategy, and positive action 
on this issue is one of our highest priorities.
    (vi) Enacting and implementing legislation addressing 
amnesty.
    The preconditions for a general amnesty do not yet exist. 
That said, the Government of Iraq established a high-level 
Reconciliation Committee to support and oversee efforts by 
groups that want to oppose al-Qaida in Iraq and other extremist 
elements. This committee is working with a joint U.S. Embassy/
MNF-I group that is facilitating such actions in coordination 
with other anti-terrorist efforts on the ground. In the absence 
of legislation, the Government of Iraq--at the direction of the 
Prime Minister--has initiated a program of limited immunity for 
individuals who have turned away from supporting al-Qaida and 
have now pledged support to the government. While this program 
may not meet the requirement for enacting and implementing 
legislation, on-the-ground programs of limited immunity are 
accomplishing some of the desired effects of this benchmark.
    Assessment: No assessment can be made until the necessary 
preconditions have been reached for implementing a general 
amnesty. However, a process of local accommodation and limited 
immunity has been developed and effectively implemented in al-
Anbar province, Abu Ghraib, and other locations where local 
volunteers, including some Shi'a, have been approved for hire 
by the Minister of Interior or Defense while awaiting 
completion of the reconciliation committee's screening. 
Although the Government of Iraq has not enacted or implemented 
amnesty legislation, these local programs may be creating 
preconditions for future amnesty legislation. The Embassy 
continues to engage the Government of Iraq at the highest 
levels on questions of amnesty.
    (vii) Enacting and implementing legislation establishing a 
strong militia disarmament program to ensure that such security 
forces are accountable only to the central government and loyal 
to the constitution of Iraq.
    The necessary preconditions for a Disarmament, 
Demobilization, and Reintegration (DDR) program in any post-
conflict society are steep, and key elements such as political 
reconciliation and security provided by the government do not 
yet exist, despite considerable efforts by the Government of 
Iraq, MNF-I, and the United States Embassy. Although a DDR 
Committee has been established, there is limited momentum 
toward developing and implementing a comprehensive disarmament 
program for militia members while Iraq faces a combination of 
sectarian violence, terrorist attacks, and a continuing 
insurgency. However, there are signs that certain programs and 
projects designed at the local level to re-integrate certain 
individuals and small groups back into the population are 
achieving some modest success. In general, these projects 
include education-based programs for former detainees.
    The 2007 budget of the Government of Iraq includes $150 
million for DDR. However, the funds will not be released until 
the Government of Iraq enacts legislation and establishes a 
satisfactory program for implementation.
    In Recommendation 38 and 39, the Iraq Study Group proposes 
that neutral international experts act as advisors to the 
Government of Iraq and that the United States Government fund 
and support a single office to provide assistance to these 
experts. The study also notes that ``solving the problem of 
militias requires national reconciliation'' and states that, as 
a party in the conflict, the United States Government should 
not be directly involved in a DDR program's implementation.
    Consequently, the United Nations Security Council 
Resolution 1710 expanded UNAMI's mandate to include ``advise, 
support, and assist * * * the Government of Iraq at an 
appropriate time and in connection with progress on 
reconciliation efforts, on planning, funding, and implementing 
reintegration programs for former members of illegal armed 
groups.''
    Assessment: No assessment can be made until the necessary 
preconditions have been reached for implementing a strong 
militia disarmament program. However, the Government of Iraq 
has initiated a process that reintegrates former militia 
members into the Ministry of Defense and Ministry of Interior 
architecture. In effect, this may be facilitating the necessary 
conditions for a future DDR program.
    (viii) Establishing supporting political, media, economic, 
and services committees in support of the Baghdad Security 
Plan.
    Through its February 2007 establishment of the Executive 
Steering Committee (ESC) and related subcommittees, the 
Government of Iraq has established supporting political, media, 
economic, and services committees in support of the Baghdad 
Security Plan (Operation Fardh Al Qanoon). The United States 
Embassy and MNF-I will remain intensively engaged with the ESC 
to continue to improve its effectiveness and ensure that the 
subcommittees fulfill the purpose for which they were created.
    Assessment: The Government of Iraq has made satisfactory 
progress toward establishing supporting political, media, 
economic, and services committees in support of the Baghdad 
Security Plan. Since the July 2007 assessment period, the ESC 
and related subcommittees have continued to meet weekly in 
their efforts to coordinate and synchronize policies, services, 
and other non-kinetic aspects of Operation Fardh Al Qanoon with 
security operations.
    (ix) Providing three trained and ready Iraqi brigades to 
support Baghdad operations.
    The Ministry of Defense has generated a total of eight 
Iraqi Army Brigade Headquarters and 27 Iraqi Army Battalions to 
support Baghdad operations. These units are actively involved 
in joint and independent operations throughout Baghdad and the 
Baghdad belts. The Government of Iraq provided the number of 
units required, and they were trained to the proper individual 
and collective baseline. As unit manning and composition issues 
were identified, the Government of Iraq addressed them. For 
example, in order to compensate for the number of soldiers 
absent during Operation Fardh Al Qanoon for leave or other 
reasons, the Government of Iraq expanded combat unit manning to 
120 percent of authorization, thus achieving higher present for 
duty strength. Current presentfor duty rates are now 75 percent 
of authorized strength, which is within Iraqi Army standard.
    Some of these units have performed exceptionally well, 
voluntarily extending their deployments up to 270 days and 
raising their operational readiness ratings. Over the past 2 
months the units serving with Coalition forces in the Baghdad 
Area of Operations --the 6th and 9th Iraqi Army Divisions--have 
conducted almost 400 combined operations, 700 independent 
operations, and more than 7,000 independent patrols. Some units 
have been less impressive, suffering from a variety of issues 
related to a lack of leadership and equipment to support their 
assigned missions.
    Overall, Coalition ground commanders who work side by side 
with these units are generally pleased with their performance 
and are witness to their continual development and growing 
confidence as they gain experience in the counterinsurgency 
effort. That said, Iraqi Security forces are not yet able to 
assume responsibility for security throughout the country. 
Placing that burden on the Iraqis before they are ready risks 
sacrificing the gains we have made. The ISF will require 
additional training, equipping, and logistical support.
    It was an impressive achievement for the Government of Iraq 
to provide the equivalent of three additional trained and ready 
brigades to Baghdad. Programs are in place to ensure they 
remain capable of sustaining this level of effort through 
scheduled rotations and a robust training pipeline.
    Assessment: The Government of Iraq has made satisfactory 
progress toward providing three trained and ready Iraqi 
brigades to support Baghdad operations.
    (x) Providing Iraqi commanders with all authorities to 
execute this plan and to make tactical and operational 
decisions in consultation with U.S. Commanders, without 
political intervention to include the authority to pursue all 
extremists including Sunni insurgents and Shiite militias.
    The Prime Minister has provided Iraqi commanders the 
necessary authority to conduct security operations and 
continues to reaffirm his commitment to support these 
authorities. ISF continue to prosecute targets across Iraq, 
including in operations throughout Baghdad and in provinces 
that have already been turned over to Provincial Iraqi Control. 
The Prime Minister and senior commanders increasingly recognize 
the threat to long-term security posed by Shi'a militia 
extremists and continue to support targeting such elements. In 
late August, the Prime Minister removed the Shi'a commander of 
the Karbala Operations Command, ordered the arrest of three 
prominent Shi'a militia extremists who were in Karbala for the 
12th Imam Commemoration, ordered an Iraqi Special Forces raid 
on key JAM cells in Karbala, and the strong response from the 
Iraqi government--as well as the public outrage at the 
violence--appears to have led to Muqtada al-Sadr's call for his 
extremist militia to halt all attacks against Coalition forces.
    The Iraqi Army as an institution continues to appear more 
nationally oriented and less susceptible to political 
interference than the Iraqi National Police or local forces, 
although some reform of the National Police has occurred. The 
degree of JAM influence within police forces is largely 
dependent upon the region or city. Within Baghdad, Iraqi Police 
in Sadr City and parts of Kadhamiyah are complicit with JAM 
activity. JAM influence is also strong in the cities of Al 
Amarrah, Hussaniyah, and Diwaniyah due to heavy infiltration of 
JAM members. Police activities in those areas that have been 
cleared and retained by Coalition and Iraqi forces appear to be 
the most even-handed.
    Coalition military leaders who work closely with their 
Iraqi counterparts to plan and conduct security operations have 
seen uneven progress on efforts to reduce political 
interference in military decisions. Where Iraqi security forces 
are fighting alongside Coalition Forces or manning joint 
security stations, ISF tactical commanders generally act on 
mission orders from their established chains of command.
    There are no reported instances of political interference 
in operations directed against Sunni insurgents. However, there 
is evidence of political officials attempting to limit the 
effectiveness of independent Iraqi operations against Shi'a 
extremists. Political interference typically emanates from 
individuals in the Government of Iraq below the level of the 
Prime Minister, and the Prime Minister has taken actions to 
limit such interference. For example, the Prime Minister was 
recently provided evidence of arrest lists for Sunni targets 
generated by an office below him that bypassed operational 
commanders. The Prime Minister responded by reorganizing and 
reducing the size of the office. As far as we can determine, 
any previous restrictions on targeting certain sects are no 
longer present.
    There also is still evidence of political interference with 
ISF operations from both the Ministry of Interior and the 
Office of the Commander in Chief (OCINC). Questionable judicial 
warrants by the OCINC have been used to try to replace Sunni 
officers who demonstrated effectiveness against Jaysh al-Mahdi 
operations in Baghdad and in southern provinces. In Muthanna 
province, there is evidence that Ministry of Interior officials 
have used de-Ba'athification laws to replace effective Sunni 
police officers with Shi'a officers. JAM-associated Ministry of 
Interior officials continue to exert such a significant 
influence over the Basra Police that the new Basra Provincial 
Director of Police raised this issue at a meeting with the 
Ministerial Council on National Security.
    There is strong evidence of efforts to remove sectarian 
commanders in the National Police. Since the start of this 
year, all Division Commanders, all Brigade Commanders, and 17 
of 27 battalion commanders in the National Police were relieved 
of duty due to allegations of sectarian activity. In addition, 
a former Police Division Commander reassigned due to serious 
allegations has since been removed from his follow-on 
assignment as well. This is a signal that the Government of 
Iraq is committed to taking action with regard to sectarian 
bias.
    While the recent interventions by the Prime Minister and 
other government officials to curb sectarian bias are 
encouraging, the fear of being replaced for political or 
sectarianreasons remains and continues to influence commanders' 
decisions on which operations to undertake. Given the importance of 
this issue, we will need to continue monitoring the activities of 
government officials for signs of interference with ISF commanders' 
abilities to make tactical and operational decisions.
    Assessment: The Government of Iraq has made satisfactory 
progress toward providing Iraqi commanders with all authorities 
to execute this plan and to make tactical and operational 
decisions in consultation with U.S. Commanders, to include the 
authority to pursue all extremists. However, there has not been 
satisfactory progress towards eliminating political 
intervention by leaders throughout the chain of command. The 
historical prejudices inherent to Iraq remain a challenge that 
will only be fully solved by time and the experience of 
democratic government.
    (xi) Ensuring that Iraqi Security Forces are providing 
even-handed enforcement of the law.
    Individual Iraqi Army and National Police units that work 
closely with Coalition Forces generally act responsibly. The 
achievements of the 30 joint security stations and 31 Coalition 
outposts throughout Baghdad neighborhoods provide clear 
evidence that the Iraqi police and army are capable of fairly 
administering the rule of law under a partnering construct. The 
actions of many individual Iraqi commanders demonstrate that 
they independently act in a fair and professional manner. For 
example, operations against insurgent cells seem to be even-
handed--targeting both Sunni and Shi'a elements. In the last 
week of August, Coalition and Iraqi Special Forces jointly 
killed or captured more than 100 cell members, about one third 
of whom were JAM members who had committed criminal actions.
    Education and training have been key ingredients in 
improving enforcement of the law. Under the National Police 
Transformation plan, eight of the nine National Police brigades 
have completed a month-long training course on the rule of law, 
professionalism, and policing techniques. The latest class of 
1,800 National Policemen just graduated from the Numaniyah 
National Police College on 20 August. Initial indications show 
that even seasoned units perform better after completing such a 
``re-bluing'' program. Similar programs are also used for local 
police. Still, some police units operating outside of close 
Coalition supervision tend to gravitate to old habits of 
sectarianism. In late August, the Minister of Interior had to 
issue an arrest warrant for a police company commander and 
several in his command for sectarian behavior. This indicates 
both the persistence of the problem and a genuine desire by the 
leadership to clean up the image and performance of the police 
force.
    Improvements within the Iraqi legal system are providing 
the Government of Iraq with new ways to handle rule of law 
issues. The government introduced a new military justice 
system, trained 16 judges and 4 prosecutors, and established a 
unit training program for Commanders and Disciplinary Officers 
that is administered by almost 100 trained legal advisors 
assigned across all Iraqi Army divisions. Within the past 
month, high-profile and high-ranking offenders within the ISF--
both Sunni and Shi'a--have been arrested and are currently 
under investigation, pending trial for their sectarian-based 
crimes. Judges in the secure Rusafa Rule of Law Complex have 
already shown their determination to impose tough justice on 
both Sunni and Shi'a members of sectarian death squads. Since 
the start of the year they have sentenced roughly equal numbers 
of Sunni and Shi'a criminals to death.
    Through continued mentoring and partnership, additional 
training of ISF units, and increased emphasis by the Government 
of Iraq, even-handed enforcement of the law may increasingly 
become the norm, even in the absence of Coalition oversight. We 
expect Government of Iraq actions, not Coalition oversight, to 
hold the ISF to a high standard in the future.
    Assessment: The Government of Iraq has made satisfactory 
progress in ensuring that the Iraqi Army is providing even-
handed enforcement of the law, though much remains to be done 
in this area. However the Iraqi Police has not made 
satisfactory progress, as some elements still act with a 
sectarian bias. The replacement of 28 National Police 
Commanders, as well as the ``re-bluing'' training for National 
Police Brigades, should produce improvements in this area over 
the coming months.
    (xii) Ensuring that, as President Bush quoted Prime 
Minister Maliki as saying, ``the Baghdad Security Plan will not 
provide a safe haven for any outlaws, regardless of [their] 
sectarian or political affiliation.''
    In accordance with the promise made by Prime Minister 
Maliki, the Government of Iraq has allowed Coalition forces to 
conduct operations in all areas of Baghdad.
    Almost 3 months into surge operations, the coordinated 
offensive operations of ISF and Coalition forces have made 
significant progress against terrorist and extremist elements, 
particularly in Baghdad, the surrounding ``belts,'' and Diyala. 
In Baghdad, the focus of operations has been along the fault 
lines between Sunni and Shi'a neighborhoods, where economic and 
social conditions make the population most susceptible to 
extremism. Our counterinsurgency strategy relies on 
establishing joint security stations in troubled neighborhoods, 
continuous joint ISF and Coalition Force security operations, 
Coalition outposts to expand the reach of Coalition forces, and 
reconstruction programs to restore quality of life. These 
actions have resulted in a steady improvement in population 
security, increasing trust of Baghdad residents, and a decrease 
in the number of areas where terrorists and extremists can 
operate. In late March 2007, only about 10 percent of Baghdad 
neighborhoods were secured by Iraqi and Coalition forces. By 
the end of August more than three-quarters of the city's 
neighborhoods had been cleared and now benefit from the 
continued presence of security forces.
    Prior to clearing operations in Baqubah, Coalition 
operations were plagued by IED attacks and had difficulty 
locating insurgent cells and weapons caches. Once Coalition and 
Iraqi forces established a permanent presence in the city, 
weekly IED and indirect fire attacks dropped by 75 percent, and 
local citizens began pointing out booby-trapped houses, buried 
IEDs and weapons caches. Total attacks against civilians, ISF, 
andCoalition forces for all of Diyala province have decreased 
in 7 of the past 10 weeks. In the past month alone more than 140 IEDs 
and 61 weapons caches have been cleared, in great part due to tips from 
local residents.
    Even in places like Sadr City, Coalition and Iraqi forces 
have pressured militia extremists and criminals. Since January, 
more than 80 operations have been conducted, spanning each 
sector of Sadr City and capturing or killing many insurgent and 
militia cell leaders. In contrast to the perception that Sadr 
City is a safe haven for extremists, Coalition and Iraqi 
patrols operate there and continue to disrupt cells that plant 
IEDs or launch mortar attacks in Baghdad. Reconstruction 
projects continue in Sadr City with hospital renovations 94 
percent complete, three new water system projects completed in 
July and at least four ongoing medical clinic projects.
    The Government of Iraq and Coalition elements are 
exploiting improved security by revitalizing economic and 
social programs, thereby preventing the reappearance of 
conditions that would promote a return of extremists. The 
Baqubah Flour Mill just received a shipment of 560 tons of 
grain--its first in over a year. This mill will now employ 200 
local workers. In Amariyah, Ghazaliyah, Yusifiyah, Adhamiyah, 
and Abu Ghraib, tribal initiatives against al-Qaida are gaining 
momentum and have garnered the increased support of the 
Government of Iraq. In Adhamiyah alone, 1000 Iraqis volunteered 
to help the ISF and Coalition forces bring security to their 
neighborhood. Overall, operations in Baghdad have made an 
impact, but work remains to be done, especially in the Sadr 
City area of Baghdad and in Kadhamiyah. These neighborhoods 
remain some of our bigger challenges.
    Assessment: The Government of Iraq has made satisfactory 
progress toward ensuring that the Baghdad Security Plan will 
not provide a safe haven for any outlaws, regardless of their 
sectarian or political affiliation.
    (xiii) Reducing the level of sectarian violence in Iraq and 
eliminating militia control of local security.
    Ethno-sectarian violence is incited by a variety of 
motivations and methods, making it difficult to measure and 
control. Coalition and Iraqi partners are working hard to break 
the vicious cycle of provocation and retaliation that was at 
the heart of last winter's surge in casualties and displacement 
from troubled neighborhoods. After considering a number of 
indicators developed from both host nation and Coalition 
reports, there are promising signs that we may be succeeding in 
breaking this cycle.
    While there are still millions of Iraqis who have been 
displaced from their homes by intimidation and violence, some 
small groups are beginning to return to areas where violence 
has been reduced. By both our estimate and those of the 
national intelligence community, the number of ethno-sectarian 
attacks and deaths nationwide has fluctuated somewhat over the 
past several months, but they are now less than half of the 
December 2006 levels. Ethno-sectarian attacks in the Baghdad 
districts have fallen even more sharply, down to roughly one-
quarter the levels of December 2006. Total attacks on civilians 
across Iraq have declined in 13 of the past 18 weeks. 
Unfortunately, total civilian casualties did not fall as 
significantly over the same period, as al-Qaida launched 
several high-casualty vehicle IED attacks in Baghdad and the 
northern provinces in an attempt to provoke greater sectarian 
violence. However, in a sign of progress, Iraqis did not 
respond to these attacks with widespread sectarian-based 
retaliation, allowing for an underlying downward trend in 
civilian casualties. Overall, these trends have been achieved 
through increased Coalition and Iraqi presence in Baghdad, 
operations in the Baghdad belts, and an increase in the number 
of national leaders who have publicly renounced sectarian 
violence and called for restraint in the wake of high-profile 
IED attacks.
    Despite these gains, progress against militia extremists is 
mixed. Operations conducted since May have significantly 
contributed to eliminating militia control of local security in 
areas that Coalition forces have cleared and now hold. In some 
cities such as Baghdad, Ramadi, Abu Ghraib, and Baqubah, local 
militia members are formally joining the local Iraqi security 
forces and providing effective community security, as well as 
valuable tips on caches and the location of extremist leaders. 
Despite the recent assassination of the elected governors in 
Qadisiyah and Muthanna, we believe that discrete offensive 
operations against militia extremist leaders in the central 
southern provinces offer the opportunity for larger gains 
against the militias. However, militias are still acting 
outside the law in the uncleared parts of Baghdad and the 
southern provinces of Karbala, Basra, Qadisiyah, and Maysan. In 
these areas, militia members have either infiltrated Iraqi 
Security Forces or brokered deals with the local ISF or 
civilian leadership.
    The national government continues its efforts to curb 
militia control of Iraqi Security Forces by its selection of 
leaders and key arrests, but they remain one step behind the 
problem. It is too early to be optimistic about statements by 
Muqtada al-Sadr, though the increasing number of Shi'a and 
Sunni tribal sheikhs reaching out to become part of the 
solution is a promising sign. We will continue to provide 
guidance and support to the Government of Iraq in negotiations, 
reconciliation, military operations, and legal action to 
address this issue.
    Assessment: The Government of Iraq has made satisfactory 
progress toward reducing sectarian violence. Where ISF and 
Coalition forces have conducted clear and hold operations, 
militia control has been significantly reduced. However, 
satisfactory progress has not been made toward eliminating 
militia control of local security in other areas, as evidenced 
by continued militia influence of certain Baghdad neighborhoods 
and other areas across Iraq.
    (xiv) Establishing all of the planned joint security 
stations in neighborhoods across Baghdad.
    Nearly all of the planned joint security stations, 
Coalition outposts, and other patrol bases have been 
established across Baghdad and the surrounding area. As of 
August 31, 2007, 30 of 33 planned joint security stations were 
operational and 31 Coalition combat outposts had achieved 
operational capability. Joint security stations provide 
anaround-the-clock security presence in most of Baghdad and are 
particularly effective as they merge Coalition partnering with Iraqi 
presence and action. There are numerous examples where Iraqi presence 
has facilitated a lower application of force and a more positive 
result. Other stations are being established in outlying areas where 
interaction with the local people can have a direct impact on the 
reduction of violence within the city. This increased interaction with 
the local population should continue to suppress crime and sectarian 
violence as well as provide valuable intelligence to support economic 
growth, political accommodation, and counterinsurgency operations.
    Joint security stations are also being successfully 
employed in al-Anbar province and numerous other locations 
across Iraq. Coalition leaders will continue to consult with 
the Baghdad Operational Center and national leadership to 
determine additional emplacements.
    Assessment: The Government of Iraq has made satisfactory 
progress toward establishing the planned Joint Security 
Stations in Baghdad neighborhoods.
    (xv) Increasing the number of Iraqi Security Forces units 
capable of operating independently.
    Iraqi Army, Air Force, and Police units\1\ continue to grow 
in size. The Iraqi Army has expanded greatly since December 
2006, when there were 149 units in operation and 9 under 
development. Currently, there are 152 combat units in operation 
and 29 under development. Since March 2007, there has been a 14 
percent increase in the number of independent Iraqi Army 
operations, including 20 units operating independently as part 
of Fardh Al-Qanoon and 10 units assuming the lead role in their 
areas of responsibility. While only a small percentage of 
battalions are rated as capable of completely independent 
counterinsurgency operations (Operational Readiness Assessment 
Level One), over 75 percent are capable of planning, executing, 
and sustaining operations with some Coalition support and of 
making significant contributions to combat operations. The 
greatest constraints on independent operations are a shortage 
of trained leaders and immature logistics capability.
---------------------------------------------------------------------------
    \1\ A unit is an Iraqi Army combat battalion or an Iraqi Army 
combat brigade headquarters or an Iraqi Army combat division 
headquarters.
---------------------------------------------------------------------------
    Iraqi Security Forces recently demonstrated their improved 
ability when they independently planned, rehearsed, and 
executed security for the annual pilgrimage in commemoration of 
the death of the Seventh Imam. This event, which included a 
march of a million Shi'a pilgrims to Baghdad's Kadhamiyah 
Shrine, had been marred by significant violence each of the 
last 3 years, including 1,000 people who were killed in a 
stampede in 2005 when they feared a car bomb attack. This 
year's event had no violence and was a great tribute to the 
Iraqi Security Forces and the government. The ISF planning and 
execution of the 12th Imam celebration in Karbala in late 
August 2007 was marred by JAM-instigated violence, but the Iraq 
security forces protected the shrines and defeated JAM attacks. 
Rapid reaction by the Government of Iraq--led by the Prime 
Minister personally--contained the violence and demonstrated 
another step toward eventual independent security capability.
    The Iraqi Police continues to grow in size, particularly in 
newly cleared population centers where the increased demand for 
officers is often well-supported by local volunteers and the 
Government of Iraq. Police forces in the seven provinces under 
Iraqi control operate independently. Police capabilities in the 
remaining provinces show improvement that has been enhanced by 
local militias and concerned citizens joining the fight against 
al-Qaida. The use of additional local security forces has 
significantly increased the number of tips, resulting in a 50 
percent increase in the number of caches found nationwide and a 
doubling of caches found in Baghdad. The increased number of 
tips has also led to the capture or killing of al-Qaida and 
irreconcilable militia leaders.
    Although not yet capable of independent operations, three 
Air Force flying squadrons are progressing satisfactorily, 
doubling the amount of cargo and passengers flown since the 
start of the year. They have also conducted joint 
infrastructure security operations with the Iraqi Army and 
energy ministries and recently stood up an Iraqi Air Operations 
Center.
    The growing size of Iraqi Security Forces and the need to 
increase the manning levels of existing units continues to 
present the Government of Iraq with force management 
challenges, particularly in the areas of leaders and logistics. 
For the present time, Coalition partnership and support remains 
necessary for most ISF operations. The Coalition is assisting 
the Government of Iraq as it develops a more mature ISF force 
structure that is capable of providing institutional 
sustainment. Again, we should be wary of placing too much 
strain on this force until we are comfortable it can meet the 
challenges posed by our determined common enemies in Iraq.
    Assessment: Although there is progress in the development 
and operation of the Iraqi Security Forces, the Government of 
Iraq has not made satisfactory progress toward increasing the 
number of Iraqi Security Force units capable of operating 
independently. Many units have made considerable progress in 
their ability to conduct combat operations, but the number of 
units earning Operational Readiness Assessment Level One 
ratings has not increased as much as desired. However, we 
should not understate the marked increase in ISF capability to 
conduct combat operations successfully, including clearing and 
holding neighborhoods, planning and conducting operations, 
defending themselves, protecting the population, and responding 
to contingencies on short notice.
    (xvi) Ensuring that the rights of minority political 
parties in the Iraqi legislature are protected.
    Article 37 of the Iraqi Constitution guarantees all Iraqis 
freedom to form and join associations and political parties. 
Minorities are guaranteed equal access to and participation in 
elections for the COR. The COR elected in December 2005 
includes representatives from the Shi'a, Sunni, Kurdish, 
Turkmen, Chaldo-Assyrian Christian, andYazidi communities. The 
Rules of Procedure for the COR guarantee the ability of its members to 
express their opinions, regardless of political party or affiliation, 
helping to ensure the full participation of all its members, and COR 
leaders have followed these rules in practice. COR rules permit groups 
as small as 10 members out of 275 to propose legislation.
    The United States Mission is fully engaged with the Iraqi 
parliament to ensure appreciation for the concern attached by 
the United States to representation of women and minorities and 
a role for minority parties.
    Assessment: The Government of Iraq has made satisfactory 
progress toward ensuring that the rights of minority political 
parties in the Iraqi legislature are protected.
    (xvii) Allocating and spending $10 billion in Iraqi 
revenues for reconstruction projects, including delivery of 
essential services, on an equitable basis.
    While it is too soon to tell by how much budget execution 
will improve by the end of 2007, there is no doubt that the 
Government of Iraq is overcoming many of the problems it faced 
in 2006. Indeed, 2007 capital budget execution is already on 
par with last year's total level, and the full $10 billion 
capital budget has been allocated. Given the long-term nature 
of some capital projects, some of the 2007 capital funds will 
not be disbursed until later years. The Government of Iraq has 
also launched its 2008 budget process, which will ensure the 
progress in 2007 continues to move forward.
    Both the central government and the provincial governments 
are becoming more effective at allocating and spending their 
capital budgets for reconstruction and the delivery of 
essential services.\2\ The 2007 Iraqi budget represents the 
first time in modern Iraqi history that provincial governments 
have been able to formulate and implement their own capital 
budgets. The Government of Iraq ministries are already 
exceeding their 2006 levels of budget execution. The ability to 
allocate and spend a capital budget effectively is a necessary 
first step for a functioning government to meet the needs of 
its people. Government of Iraq and provincial officials across 
the country have shown by their actions that budget execution 
is, indeed, a focal point as they continue to improve 
governance and move toward self-reliance.
---------------------------------------------------------------------------
    \2\ To aid interpretation, a terminology guide from Baghdad Cable 
2541 follows:
    --Government of Iraq ``Spending Plan/Budget Allocation'': Budgetary 
authority to a Government of Iraq unit, in accordance with the Budget 
Law, with sub-allocations deferred by the Ministry of Finance (MOF.) 
This equates to a United States Government ``commitment'' or an 
internal reservation of funds for a particular purpose.
    --Government of Iraq ``Release'': Equates to United States 
Government apportionment; release of funds from MOF (OMB has this 
responsibility in the United States Government) to a spending unit 
based on project needs or cash flow. Ministry of Planning and 
Development Cooperation (MOPDC) reviews and approves the spending 
unit's request for release, and the MOF confirms consistency with the 
approved budget allocation and liquidity needs of the spending unit.
    --Government of Iraq ``Commitment'': Equates to a United States 
Government obligation, i.e.,the spending unit awards a contract or 
other binding agreement.
    --Government of Iraq ``Disbursed'': Equates to United States 
Government expenditures or outlays. Two types of expenditures are often 
used interchangeably: (1) funds disbursed to a non-Government of Iraq 
entity (e.g., contractor) resulting in a net outlay; and (2) 
disbursements from one Government of Iraq account to another.
---------------------------------------------------------------------------
    In 2006, the Government of Iraq spent roughly 22 percent of 
its $6.2 billion non-provincial capital budget. Lack of 
technical capacity, security issues, and, in many cases, fear 
of prosecution for corruption effectively paralyzed much of the 
Government of Iraq's spending. In 2007, an intense focus and 
training on budget execution at the highest levels of the 
Government of Iraq bolstered technical capacity and encouraged 
action, though capacity constraints persist. As a result, 
according to Ministry of Finance (MOF) data through mid-July 
2007, total Government of Iraq ministries have already spent 
approximately 24 percent of their 2007 capital budgets.
    Ministerial allocation and spending are also moving ahead, 
with the most successful ministries being key service 
providers, such as Oil, Electricity, Housing, Municipalities 
and Public Works, Planning, and Education. These select 
ministries have all spent at least 21 percent of their 2007 
capital budget, with some committing as much as 57 percent. 
Some ministries remain challenged in the face of capacity 
constraints and problems associated with lack of security and 
will continue to be monitored appropriately.
    Provincial Reconstruction Team data indicate that 
provincial governments have committed over 47 percent of their 
2007 capital budgets. Provinces also continue to spend their 
remaining 2006 funds and are estimated by the MOF to have 
committed 100 percent of these funds, most of which were 
received in late December 2006.
    The province of al-Anbar exemplifies the improvement in 
provincial budget execution. On June 4,2007, the Anbar 
Provincial Council approved its province's capital budget. It 
then issued a call for tenders, analyzed the bids, and signed 
the first 17 contracts in a public ceremony on August 13, 2007. 
Over half of the remaining contracts to spend the rest of the 
provincial budget are ready for signature, bringing al-Anbar's 
spending commitments to $25 million as of mid-August.
    Assessment: The Government of Iraq is making satisfactory 
progress in allocating funds to ministries and provinces. The 
full $10 billion capital budget is allocated, although spending 
units will not be able to spend all these funds by the end of 
2007 given the long-term nature of some capital projects. The 
Ministry of Planning Development and Cooperation and the 
Ministry of Finance have released 30 percent of 2007 budgeted 
capital funds to Iraqi government ministries, as well as 24 
percent of 2007 budgeted capital funds to regions and 
provinces. Processing of Letters of Credit has improved, 
benefiting the Ministry of Electricity and other ministries 
that rely on international procurement. The Ministry of 
Planning Development and Cooperation is demonstrating 
leadership on procurement policy and technical assistance.
    Despite these efforts and its stronger performance relative 
to last year, the Government of Iraq is unlikely to spend its 
entire $10 billion capital budget by the end of 2007. 
Nevertheless, it should be highlighted that both ministries and 
provinces are executing a greater percentage of much larger 
capital budgets, which significantly increases ministry and 
provincial expenditures on an absolute dollar basis.
    (xviii) Ensuring that Iraq's political authorities are not 
undermining or making false accusations against members of the 
ISF.
    Progress is clearly being made in this area, though the 
overall effect is difficult to accurately assess. The maturing 
of the inspectors general system and the continued education of 
commanders at all levels are positive signs. The Council of 
Representatives' approval of the Military Justice Law and 
improvements in the judicial system have helped to 
institutionalize the rule of law and stand in marked contrast 
to the legacy of former regime practices.
    Sectarian bias is not limited to Shi'a officials, as some 
Sunni politicians have made baseless claims against ISF 
officials who are Shi'a. It appears from anecdotal evidence 
that some Iraqi authorities may not be pursuing some of these 
allegations. It is difficult to determine whether these 
accusations result from actual misconduct, inaccurate 
reporting, or the sectarian-bias of Iraqi political 
authorities. We continue to challenge the Government of Iraq to 
investigate each one and take action, as appropriate.
    The Prime Minister and his ministerial council are trying 
to curb this problem. We will push for improvements, although 
the key to success will be our ability to institutionalize the 
rule of law in government practices. At the same time we will 
continue to press Iraqi political leaders to investigate and 
then confront those who make baseless accusations against ISF 
leaders for sectarian and political gain.
    Assessment: The Government of Iraq has not made 
satisfactory progress in ensuring that Iraq's political 
authorities are not undermining or making false accusations 
against members of the ISF. Though there is weekly evidence of 
a more determined effort by the Government of Iraq to address 
these issues and seek resolution, there remains much work to be 
done in this benchmark. The historical challenge inherent in 
Iraq, compounded by the damage done by sectarian violence 
following the Samarra Mosque bombing, remains a challenge that 
will only be fully solved by education and time.

                               APPENDIX I

Report to Congress on the Situation in Iraq, General David H. Petraeus, 
      Commander, Multi-National Force--Iraq, 10-11 September 2007

    Mr. Chairmen, Ranking Members, Members of the Committees, 
thank you for the opportunity to provide my assessment of the 
security situation in Iraq and to discuss the recommendations I 
recently provided to my chain of command for the way forward.
    At the outset, I would like to note that this is my 
testimony. Although I have briefed my assessment and 
recommendations to my chain of command, I wrote this testimony 
myself. It has not been cleared by, nor shared with, anyone in 
the Pentagon, the White House, or Congress.
    As a bottom line up front, the military objectives of the 
surge are, in large measure, being met. In recent months, in 
the face of tough enemies and the brutal summer heat of Iraq, 
Coalition and Iraqi Security Forces have achieved progress in 
the security arena. Though the improvements have been uneven 
across Iraq, the overall number of security incidents in Iraq 
has declined in 8 of the past 12 weeks, with the numbers of 
incidents in the last two weeks at the lowest levels seen since 
June 2006.
    One reason for the decline in incidents is that Coalition 
and Iraqi forces have dealt significant blows to Al Qaeda-Iraq. 
Though Al Qaeda and its affiliates in Iraq remain dangerous, we 
have taken away a number of their sanctuaries and gained the 
initiative in many areas.
    We have also disrupted Shia militia extremists, capturing 
the head and numerous other leaders of the Iranian-supported 
Special Groups, along with a senior Lebanese Hezbollah 
operative supporting Iran's activities in Iraq.
    Coalition and Iraqi operations have helped reduce ethno-
sectarian violence, as well, bringing down the number of ethno-
sectarian deaths substantially in Baghdad and across Iraq since 
the height of the sectarian violence last December. The number 
of overall civilian deaths has also declined during this 
period, although the numbers in each area are still at 
troubling levels.
    Iraqi Security Forces have also continued to grow and to 
shoulder more of the load, albeit slowly and amid continuing 
concerns about the sectarian tendencies of some elements in 
their ranks. In general, however, Iraqi elements have been 
standing and fighting and sustaining tough losses, and they 
have taken the lead in operations in many areas.
    Additionally, in what may be the most significant 
development of the past 8 months, the tribal rejection of Al 
Qaeda that started in Anbar Province and helped produce such 
significant change there has now spread to a number of other 
locations as well.
    Based on all this and on the further progress we believe we 
can achieve over the next few months, I believe that we will be 
able to reduce our forces to the pre-surge level of brigade 
combat teams by next summer without jeopardizing the security 
gains that we have fought so hard to achieve.
    Beyond that, while noting that the situation in Iraq 
remains complex, difficult, and sometimes downright 
frustrating, I also believe that it is possible to achieve our 
objectives in Iraq over time, though doing so will be neither 
quick nor easy.
    Having provided that summary, I would like to review the 
nature of the conflict in Iraq, recall the situation before the 
surge, describe the current situation, and explain the 
recommendations I have provided to my chain of command for the 
way ahead in Iraq.

                       THE NATURE OF THE CONFLICT

    The fundamental source of the conflict in Iraq is 
competition among ethnic and sectarian communities for power 
and resources. This competition will take place, and its 
resolution is key to producing long-term stability in the new 
Iraq. The question is whether the competition takes place more- 
or less-violently. This chart shows the security challenges in 
Iraq. Foreign and home-grown terrorists, insurgents, militia 
extremists, and criminals all push the ethno-sectarian 
competition toward violence. Malign actions by Syria and, 
especially, by Iran fuel that violence. Lack of adequate 
governmental capacity, lingering sectarian mistrust, and 
various forms of corruption add to Iraq's challenges.

              THE SITUATION IN DECEMBER 2006 AND THE SURGE

    In our recent efforts to look to the future, we found it 
useful to revisit the past. In December 2006, during the height 
of the ethno-sectarian violence that escalated in the wake of 
the bombing of the Golden Dome Mosque in Samarra, the leaders 
in Iraq at that time--General George Casey and Ambassador 
Zalmay Khalilzad--concluded that the coalition was failing to 
achieve its objectives. Their review underscored the need to 
protect the population and reduce sectarian violence, 
especially in Baghdad. As a result, General Casey requested 
additional forces to enable the Coalition to accomplish these 
tasks, and those forces began to flow in January.
    In the ensuing months, our forces and our Iraqi 
counterparts have focused on improving security, especially in 
Baghdad and the areas around it, wresting sanctuaries from Al 
Qaeda control, and disrupting the efforts of the Iranian-
supported militia extremists. We have employed 
counterinsurgency practices that underscore the importance of 
units living among the people they are securing, and 
accordingly, our forces have established dozens of joint 
security stations and patrol bases manned by Coalition and 
Iraqi forces in Baghdad and in other areas across Iraq.
    In mid-June, with all the surge brigades in place, we 
launched a series of offensive operations focused on: expanding 
the gains achieved in the preceding months in Anbar Province; 
clearing Baqubah, several key Baghdad neighborhoods, the 
remaining sanctuaries in Anbar Province, and important areas in 
the so-called ``belts'' around Baghdad; and pursuing Al Qaeda 
in the Diyala River Valley and several other areas.
    Throughout this period, as well, we engaged in dialogue 
with insurgent groups and tribes, and this led to additional 
elements standing up to oppose Al Qaeda and other extremists. 
We also continued to emphasize the development of the Iraqi 
Security Forces and we employed nonkinetic means to exploit the 
opportunities provided by the conduct of our kinetic 
operations--aided in this effort by the arrival of additional 
Provincial Reconstruction Teams.

                      CURRENT SITUATION AND TRENDS

    The progress our forces have achieved with our Iraqi 
counterparts has, as I noted at the outset, been substantial. 
While there have been setbacks as well as successes and tough 
losses along the way, overall, our tactical commanders and I 
see improvements in the security environment. We do not, 
however, just rely on gut feel or personal observations; we 
also conduct considerable data collection and analysis to gauge 
progress and determine trends. We do this by gathering and 
refining data from coalition and Iraqi operations centers, 
using a methodology that has been in place for well over a year 
and that has benefited over the past seven months from the 
increased presence of our forces living among the Iraqi people. 
We endeavor to ensure our analysis of that data is conducted 
with rigor and consistency, as our ability to achieve a nuanced 
understanding of the security environment is dependent on 
collecting and analyzing data in a consistent way over time. 
Two U.S. intelligence agencies recently reviewed our 
methodology, and they concluded that the data we produce is the 
most accurate and authoritative in Iraq.
    As I mentioned up front, and as the chart before you 
reflects, the level of security incidents has decreased 
significantly since the start of the surge of offensive 
operations in mid-June, declining in 8 of the past 12 weeks, 
with the level of incidents in the past two weeks the lowest 
since June 2006 and with the number of attacks this past week 
the lowest since April 2006.
    Civilian deaths of all categories, less natural causes, 
have also declined considerably, by over 45% Iraq-wide since 
the height of the sectarian violence in December. This is shown 
by the top line on this chart, and the decline by some 70% in 
Baghdad is shown by the bottom line. Periodic mass casualty 
attacks by Al Qaeda have tragically added to the numbers 
outside Baghdad, in particular. Even without the sensational 
attacks, however, the level of civilian deaths is clearly still 
too high and continues to be of serious concern.
    As the next chart shows, the number of ethno-sectarian 
deaths, an important subset of the overall civilian casualty 
figures, has also declined significantly since the height of 
the sectarian violence in December. Iraq-wide, as shown by the 
top line on this chart, the number of ethno-sectarian deaths 
has come down by over 55%, and it would have come down much 
further were it not for the casualties inflicted by barbaric Al 
Qaeda bombings attempting to reignite sectarian violence. In 
Baghdad, as the bottom line shows, the number of ethno-
sectarian deaths has come down by some 80% since December. This 
chart also displays the density of sectarian incidents in 
various Baghdad neighborhoods and it both reflects the progress 
made in reducing ethno-sectarian violence in the Iraqi capital 
and identifies the areas that remain the most challenging.
    As we have gone on the offensive in former Al Qaeda and 
insurgent sanctuaries, and as locals have increasingly 
supported our efforts, we have found a substantially increased 
number of arms, ammunition, and explosives caches. As this 
chart shows, we have, so far this year, already found and 
cleared over 4,400 caches, nearly 1,700 more than we discovered 
in all of last year. This may be a factor in the reduction in 
the number of overall improvised explosive device attacks in 
recent months, which as this chart shows, has declined sharply, 
by about one-third, since June.
    The change in the security situation in Anbar Province has, 
of course, been particularly dramatic. As this chart shows, 
monthly attack levels in Anbar have declined from some 1,350 in 
October 2006 to a bit over 200 in August of this year. This 
dramatic decrease reflects the significance of the local 
rejection of Al Qaeda and the newfound willingness of local 
Anbaris to volunteer to serve in the Iraqi Army and Iraqi 
Police Service. As I noted earlier, we are seeing similar 
actions in other locations, as well.
    To be sure, trends have not been uniformly positive across 
Iraq, as is shown by this chart depicting violence levels in 
several key Iraqi provinces. The trend in Nineveh Province, for 
example, has been much more up and down, until a recent 
decline, and the same is true in Sala ad Din Province, though 
recent trends there and in Baghdad have been in the right 
direction. In any event, the overall trajectory in Iraq--a 
steady decline of incidents in the past three months--is still 
quite significant.
    The number of car bombings and suicide attacks has also 
declined in each of the past 5 months, from a high of some 175 
in March, as this chart shows, to about 90 this past month. 
While this trend in recent months has been heartening, the 
number of high profile attacks is still too high, and we 
continue to work hard to destroy the networks that carry out 
these barbaric attacks.
    Our operations have, in fact, produced substantial progress 
against Al Qaeda and its affiliates in Iraq. As this chart 
shows, in the past 8 months, we have considerably reduced the 
areas in which Al Qaeda enjoyed sanctuary. We have also 
neutralized 5 media cells, detained the senior Iraqi leader of 
Al Qaeda-Iraq, and killed or captured nearly 100 other key 
leaders and some 2,500 rank-and-file fighters. Al Qaeda is 
certainly not defeated; however, it is off balance and we are 
pursuing its leaders and operators aggressively. Of note, as 
the recent National Intelligence Estimate on Iraq explained, 
these gains against Al Qaeda are a result of the synergy of 
actions by: conventional forces to deny the terrorists 
sanctuary; intelligence, surveillance, and reconnaissance 
assets to find the enemy; and special operations elements to 
conduct targeted raids. A combination of these assets is 
necessary to prevent the creation of a terrorist safe haven in 
Iraq.
    In the past six months we have also targeted Shia militia 
extremists, capturing a number of senior leaders and fighters, 
as well as the deputy commander of Lebanese Hezbollah 
Department 2800, the organization created to support the 
training, arming, funding, and, in some cases, direction of the 
militia extremists by the Iranian Republican Guard Corps' Qods 
Force. These elements have assassinated and kidnapped Iraqi 
governmental leaders, killed and wounded our soldiers with 
advanced explosive devices provided by Iran, and 
indiscriminately rocketed civilians in the International Zone 
and elsewhere. It is increasingly apparent to both Coalition 
and Iraqi leaders that Iran, through the use of the Qods Force, 
seeks to turn the Iraqi Special Groups into a Hezbollah-like 
force to serve its interests and fight a proxy war against the 
Iraqi state and coalition forces in Iraq.
    The most significant development in the past six months 
likely has been the increasing emergence of tribes and local 
citizens rejecting Al Qaeda and other extremists. This has, of 
course, been most visible in Anbar Province. A year ago the 
province was assessed as ``lost'' politically. Today, it is a 
model of what happens when local leaders and citizens decide to 
oppose Al Qaeda and reject its Taliban-like ideology. While 
Anbar is unique and the model it provides cannot be replicated 
everywhere in Iraq, it does demonstrate the dramatic change in 
security that is possible with the support and participation of 
local citizens. As this chart shows, other tribes have been 
inspired by the actions of those in Anbar and have volunteered 
to fight extremists as well. We have, in coordination with the 
Iraqi government's National Reconciliation Committee, been 
engaging these tribes and groups of local citizens who want to 
oppose extremists and to contribute to local security. Some 
20,000 such individuals are already being hired for the Iraqi 
Police, thousands of others are being assimilated into the 
Iraqi Army, and thousands more are vying for a spot in Iraq's 
Security Forces.

                         IRAQI SECURITY FORCES

    As I noted earlier, Iraqi Security Forces have continued to 
grow, to develop their capabilities, and to shoulder more of 
the burden of providing security for their country. Despite 
concerns about sectarian influence, inadequate logistics and 
supporting institutions, and an insufficient number of 
qualified commissioned and non-commissioned officers, Iraqi 
units are engaged around the country.
    As this chart shows, there are now nearly 140 Iraqi Army, 
National Police, and Special Operations Forces Battalions in 
the fight, with about 95 of those capable of taking the lead in 
operations, albeit with some coalition support. Beyond that, 
all of Iraq's battalions have been heavily involved in combat 
operations that often result in the loss of leaders, soldiers, 
and equipment. These losses are among the shortcomings 
identified by operational readiness assessments, but we should 
not take from these assessments the impression that Iraqi 
forces are not in the fight and contributing. Indeed, despite 
their shortages, many Iraqi units across Iraq now operate with 
minimal coalition assistance.
    As counterinsurgency operations require substantial numbers 
of boots on the ground, we are helping the Iraqis expand the 
size of their security forces. Currently, there are some 
445,000 individuals on the payrolls of Iraq's Interior and 
Defense Ministries. Based on recent decisions by Prime Minister 
Maliki, the number of Iraq's security forces will grow further 
by the end of this year, possibly by as much as 40,000. Given 
the security challenges Iraq faces, we support this decision, 
and we will work with the two security ministries as they 
continue their efforts to expand their basic training capacity, 
leader development programs, logistical structures and 
elements, and various other institutional capabilities to 
support the substantial growth in Iraqi forces.
    Significantly, in 2007, Iraq will, as in 2006, spend more 
on its security forces than it will receive in security 
assistance from the United States. In fact, Iraq is becoming 
one of the United States' larger foreign military sales 
customers, committing some $1.6 billion to FMS already, with 
the possibility of up to $1.8 billion more being committed 
before the end of this year. And I appreciate the attention 
that some members of Congress have recently given to speeding 
up the FMS process for Iraq.
    To summarize, the security situation in Iraq is improving, 
and Iraqis' elements are slowly taking on more of the 
responsibility for protecting their citizens. Innumerable 
challenges lie ahead; however, Coalition and Iraqi Security 
Forces have made progress toward achieving sustainable 
security. As a result, the United States will be in a position 
to reduce its forces in Iraq in the months ahead.

                            RECOMMENDATIONS

    Two weeks ago I provided recommendations for the way ahead 
in Iraq to the members of my chain of command and the Joint 
Chiefs of Staff. The essence of the approach I recommended is 
captured in its title: ``Security While Transitioning: From 
Leading to Partnering to Overwatch.'' This approach seeks to 
build on the security improvements our troopers and our Iraqi 
counterparts have fought so hard to achieve in recent months. 
It reflects recognition of the importance of securing the 
population and the imperative of transitioning responsibilities 
to Iraqi institutions and Iraqi forces as quickly as possible, 
but without rushing to failure. It includes substantial support 
for the continuing development of Iraqi Security Forces. It 
also stresses the need to continue the counterinsurgency 
strategy that we have been employing, but with Iraqis gradually 
shouldering more of the load. And it highlights the importance 
of regional and global diplomatic approaches. Finally, in 
recognition of the fact that this war is not only being fought 
on the ground in Iraq but also in cyberspace, it also notes the 
need to contest the enemy's growing use of that important 
medium to spread extremism.
    The recommendations I provided were informed by operational 
and strategic considerations. The operational considerations 
include recognition that:
     military aspects of the surge have achieved 
progress and generated momentum;
     Iraqi Security Forces have continued to grow and 
have slowly been shouldering more of the security burden in 
Iraq;
     a mission focus on either population security or 
transition alone will not be adequate to achieve our 
objectives;
     success against Al Qaeda-Iraq and Iranian-
supported militia extremists requires conventional forces as 
well as special operations forces; and
     the security and local political situations will 
enable us to draw down the surge forces.
    My recommendations also took into account a number of 
strategic considerations:
     political progress will take place only if 
sufficient security exists;
     long-term U.S. ground force viability will benefit 
from force reductions as the surge runs its course;
     regional, global, and cyberspace initiatives are 
critical to success; and
     Iraqi leaders understandably want to assume 
greater sovereignty in their country, although, as they 
recently announced, they do desire continued presence of 
coalition forces in Iraq in 2008 under a new U.N. Security 
Council Resolution and, followingthat, they want to negotiate a 
long term security agreement with the United States and other nations.
    Based on these considerations, and having worked the 
battlefield geometry with Lieutenant General Ray Odierno to 
ensure that we retain and build on the gains for which our 
troopers have fought, I have recommended a drawdown of the 
surge forces from Iraq. In fact, later this month, the Marine 
Expeditionary Unit deployed as part of the surge will depart 
Iraq. Beyond that, if my recommendations are approved, that 
unit's departure will be followed by the withdrawal of a 
brigade combat team without replacement in mid-December and the 
further redeployment without replacement of four other brigade 
combat teams and the two surge Marine battalions in the first 7 
months of 2008, until we reach the pre-surge level of 15 
brigade combat teams by mid-July 2008.
    I would also like to discuss the period beyond next summer. 
Force reductions will continue beyond the pre-surge levels of 
brigade combat teams that we will reach by mid-July 2008; 
however, in my professional judgment, it would be premature to 
make recommendations on the pace of such reductions at this 
time. In fact, our experience in Iraq has repeatedly shown that 
projecting too far into the future is not just difficult, it 
can be misleading and even hazardous. The events of the past 
six months underscore that point. When I testified in January, 
for example, no one would have dared to forecast that Anbar 
Province would have been transformed the way it has in the past 
6 months. Nor would anyone have predicted that volunteers in 
onetime Al Qaeda strongholds like Ghazaliyah in western Baghdad 
or in Adamiya in eastern Baghdad would seek to join the fight 
against Al Qaeda. Nor would we have anticipated that a Shia-led 
government would accept significant numbers of Sunni volunteers 
into the ranks of the local police force in Abu Ghraib. Beyond 
that, on a less encouraging note, none of us earlier this year 
appreciated the extent of Iranian involvement in Iraq, 
something about which we and Iraq's leaders all now have 
greater concern.
    In view of this, I do not believe it is reasonable to have 
an adequate appreciation for the pace of further reductions and 
mission adjustments beyond the summer of 2008 until about mid-
March of next year. We will, no later than that time, consider 
factors similar to those on which I based the current 
recommendations, having by then, of course, a better feel for 
the security situation, the improvements in the capabilities of 
our Iraqi counterparts, and the enemy situation. I will then, 
as I did in developing the recommendations I have explained 
here today, also take into consideration the demands on our 
Nation's ground forces, although I believe that that 
consideration should once again inform, not drive, the 
recommendations I make.
    This chart captures the recommendations I have described, 
showing the recommended reduction of brigade combat teams as 
the surge runs its course and illustrating the concept of our 
units adjusting their missions and transitioning 
responsibilities to Iraqis, as the situation and Iraqi 
capabilities permit. It also reflects the no-later-than date 
for recommendations on force adjustments beyond next summer and 
provides a possible approach we have considered for the future 
force structure and mission set in Iraq.
    One may argue that the best way to speed the process in 
Iraq is to change the MNF-I mission from one that emphasizes 
population security, counterterrorism, and transition, to one 
that is strictly focused on transition and counterterrorism. 
Making that change now would, in our view, be premature. We 
have learned before that there is a real danger in handing over 
tasks to the Iraqi Security Forces before their capacity and 
local conditions warrant. In fact, the drafters of the recently 
released National Intelligence Estimate on Iraq recognized this 
danger when they wrote, and I quote, ``We assess that changing 
the mission of Coalition forces from a primarily 
counterinsurgency and stabilization role to a primary combat 
support role for Iraqi forces and counterterrorist operations 
to prevent AQI trom establishing a safe haven would erode 
security gains achieved thus far.''
    In describing the recommendations I have made, I should 
note again that, like Ambassador Crocker, I believe Iraq's 
problems will require a long-term effort. There are no easy 
answers or quick solutions. And though we both believe this 
effort can succeed, it will take time. Our assessments 
underscore, in fact, the importance of recognizing that a 
premature drawdown of our forces would likely have devastating 
consequences.
    That assessment is supported by the findings of a 16 August 
Defense Intelligence Agency report on the implications of a 
rapid withdrawal of US forces trom Iraq. Summarizing it in an 
unclassified fashion, it concludes that a rapid withdrawal 
would result in the further release of the strong centrifugal 
forces in Iraq and produce a number of dangerous results, 
including a high risk of disintegration of the Iraqi Security 
Forces; rapid deterioration of local security initiatives; Al 
Qaeda-Iraq regaining lost ground and freedom of maneuver; a 
marked increase in violence and further ethno-sectarian 
displacement and refugee flows; alliances of convenience by 
Iraqi groups with internal and external forces to gain 
advantages over their rivals; and exacerbation of already 
challenging regional dynamics, especially with respect to Iran.
    Lieutenant General Odierno and I share this assessment and 
believe that the best way to secure our national interests and 
avoid an unfavorable outcome in Iraq is to continue to focus 
our operations on securing the Iraqi people while targeting 
terrorist groups and militia extremists and, as quickly as 
conditions are met, transitioning security tasks to Iraqi 
elements.

                            CLOSING COMMENTS

    Before closing, I want to thank you and your colleagues for 
your support of our men and women in uniform in Iraq. The 
Soldiers, Sailors, Airmen, Marines, and Coast Guardsmen with 
whom I'm honored to serve are the best equipped and, very 
likely, the most professional force in our nation's history. 
Impressively, despite all that has been asked of them in recent 
years, they continue to raise their right hands and volunteer 
to stay in uniform. With three weeks to go in this fiscal year, 
in fact, the Army elements in Iraq, for example, have achieved 
well over 130% of the reenlistment goals in the initial term 
and careerist categories and nearly 115% in the midcareer 
category. All of us appreciate what you have done to ensure 
that these great troopers have had what they've needed to 
accomplish their mission, just as we appreciate what you have 
done to take care of their families, as they, too, have made 
significant sacrifices in recent years.
    The advances you have underwritten in weapons systems and 
individual equipment; in munitions; in command, control, and 
communications systems; in intelligence, surveillance, and 
reconnaissance capabilities; in vehicles and counter-IED 
systems and programs; and in mannedand unmanned aircraft have 
proven invaluable in Iraq. The capabilities that you have funded most 
recently--especially the vehicles that will provide greater protection 
against improvised explosive devices--are also of enormous importance. 
Additionally, your funding of the Commander's Emergency Response 
Program has given our leaders a critical tool with which to prosecute 
the counterinsurgency campaign. Finally, we appreciate as well your 
funding of our new detention programs and rule of law initiatives in 
Iraq.
    In closing, it remains an enormous privilege to soldier 
again in Iraq with America's new ``Greatest Generation.'' Our 
country's men and women in uniform have done a magnificent job 
in the most complex and challenging environment imaginable. All 
Americans should be very proud of their sons and daughters 
serving in Iraq today.
    Thank you very much.
    
    

                              APPENDIX II

 Statement of Ambassador Ryan C. Crocker, United States Ambassador to 
   the Republic of Iraq, Before a Joint Hearing of the Committee on 
Foreign Affairs and the Committee on Armed Services, September 10, 2007

                              INTRODUCTION

    Mr. Chairman,
    Thank you for the opportunity to address Congress this 
week. I have considered it a privilege and an honor to serve in 
Iraq at a time when so much is at stake for our country and the 
people of the region--and when so many Americans of the highest 
caliber in our military and civilian services are doing the 
same. I know that a heavy responsibility weighs on my shoulders 
to provide the country with my best, most honest assessment of 
the situation in Iraq and the implications for the United 
States.
    Americans, in this chamber and beyond, are looking for more 
than an update on the latest events. They want to know the 
answers to some key questions. Are our objectives realistic? Is 
it possible that Iraq will become a united, stable country with 
a democratic government operating under the rule of law? What 
is the trajectory--is Iraq, on the whole, moving in the right 
direction? Can we expect more and under what time frame? Are 
there alternative courses of action for our country which are 
superior?
    These are sensible questions to be asked by a nation 
investing in and sacrificing for another country and people. In 
asking these questions, however, we must not lose sight of the 
vital interests the United States has in a successful outcome 
in Iraq.
    My intention today is to give you an assessment of 
political, economic, and diplomatic developments in Iraq. In 
doing so, I will not minimize the enormity of the challenges 
faced by Iraqis, nor the complexity of the situation. Yet at 
the same time, I intend to demonstrate that it is possible for 
the United States to see its goals realized in Iraq and that 
Iraqis are capable of tackling and addressing the problems 
confronting them today. A secure, stable democratic Iraq at 
peace with its neighbors is attainable. In my judgment, the 
cumulative trajectory of political, economic, and diplomatic 
developments in Iraq is upwards, although the slope of that 
line is not steep. The process will not be quick, it will be 
uneven, punctuated by setbacks as well as achievements, and it 
will require substantial U.S. resolve and commitment. There 
will be no single moment at which we can claim victory; any 
turning point will likely only be recognized in retrospect.
    This is a sober assessment, but it should not be a 
disheartening one. I have found it helpful, during my time in 
Iraq to reflect on our own history. At many points in the early 
years, our survival as a nation was questionable. Our efforts 
to build the institutions of government were not always 
successful in the first instance. And tough issues--such as 
slavery, universal suffrage, civil rights, and state rights--
were resolved only after acrimonious debate and sometimes 
violence.
    Iraq is experiencing a revolution--not just regime change. 
It is only by understanding this that we can appreciate what is 
happening in Iraq and what Iraqis have achieved, as well as 
maintain a sense of realism about the challenges that remain.

                                CONTEXT

    Evaluating where Iraqis are today only makes sense in the 
context of where they have been. Any Iraqi under 40 years old--
and that is the overwhelming majority of the population--would 
have known nothing but the rule of the Ba'ath party before 
liberation four and a half years ago. Those 35 years were 
filled with crimes against humanity on every scale. Saddam 
Hussein ruled without any mercy, not hesitating to use lethal 
force and torture against even those in his inner circle. His 
genocidal campaign against the Kurds and savagery toward 
southern Shi'a are well known. But he also used violence and 
intimidation as tools in the complete deconstruction of Iraqi 
society. No organization or institution survived that was not 
linked in some way to regime protection. He created a pervasive 
climate of fear in which even family members were afraid to 
talk to one another.
    This is the legacy that Iraqis had as their history when 
Saddam's statue came down on April 9, 2003. No Nelson Mandela 
existed to emerge on the national political scene; anyone with 
his leadership talents would have not survived. A new Iraq had 
to be built almost literally from scratch, and the builders in 
most cases were themselves reduced to their most basic 
identity, ethnic or sectarian.
    Much progress has been made, particularly in building an 
institutional framework where there was none before. But rather 
than being a period in which old animosities and suspicions 
were overcome, the past 18 months, in particular, have further 
strained Iraqi society. The sectarian violence of 2006 and 
early 2007 had its seeds in Saddam's social deconstruction and 
it had dire consequences for the people of Iraq as well as its 
politics. Extensive displacement and widespread sectarian 
killings by al-Qa'ida and other extremist groups have gnawed 
away atthe already frayed fabric of Iraqi society and politics. 
It is no exaggeration to say that Iraq is--and will remain for some 
time--a traumatized society.

                           NATIONAL POLITICS

    It is against this backdrop that developments in Iraq must 
be seen. Iraqis are facing some of the most profound political, 
economic, and security challenges imaginable. They are not 
simply grappling with the issue of who rules Iraq--but they are 
asking what kind of country Iraq will be, how it will be 
governed, and how Iraqis will share power and resources among 
each other. The constitution approved in a referendum in 2005 
answered some of these questions in theory, but much remains 
uncertain in both law and practice.
    Some of the more promising political developments at the 
national level are neither measured in benchmarks nor visible 
to those far from Baghdad. For instance, there is a budding 
debate about federalism among Iraq's leaders and, importantly, 
within the Sunni community. Those living in place like al-Anbar 
and Salahaddin are beginning to realize how localities having 
more of a say in daily decision making will empower their 
communities. No longer is an all-powerful Baghdad seen as the 
panacea to Iraq's problems. This thinking is nascent, but it is 
ultimately critical to the evolution of a common vision among 
all Iraqi leaders.
    Similarly, there is a palpable frustration in Baghdad over 
the sectarian system that was used to divide the spoils of the 
state in the last few years. Leaders from all communities 
openly acknowledge that a focus on sectarian gains has led to 
poor governance and served Iraqis badly. And many claim to be 
ready to make the sacrifices that will be needed to put 
government performance ahead of sectarian and ethnic concerns. 
Such ideas are no longer controversial, although their 
application will be.
    Finally, we are seeing Iraqis come to terms with complex 
issues not by first providing a national framework, but instead 
by tackling immediate problems. One such example is how the 
central government has accepted over 1700 young men from the 
Abu Ghurayb area west of Baghdad, including former members of 
insurgent groups, to be part of the Iraqi security forces. 
Another is how the government, without much public fanfare, has 
contacted thousands of members of the former Iraqi army, 
offering them retirement, return to the military, or public 
sector employment. So without the proclamation of a general 
amnesty, we see amnesty being granted, and deba'athification 
reform in advance of national legislation. In both instances, 
the seeds of reconciliation are being planted.
    Our country, however, has come to associate progress on 
national reconciliation as meaning the passage of key pieces of 
legislation. There is logic to this, as the legislation we are 
urging the Iraqis to produce does--in one way or another--have 
to do with the question of how to share power and resources 
among Iraq's many communities. This legislation also has to do 
with the vision of the future Iraqi state. The oil and revenues 
sharing laws, for instance, deal with deeper issues than simply 
whether Iraqis in oil producing areas are willing to share 
their wealth with other Iraqis. What is difficult about the oil 
laws is that they take Iraq another step down the road toward a 
federal system that all Iraqis have not yet embraced. But once 
again, we see that even in the absence of legislation there is 
practical action as the central government shares oil revenues 
through budget allocations on an equitable basis with Iraq's 
provinces.
    In many respects, the debates currently occurring in Iraq 
are akin to those surrounding our civil rights movement or 
struggle, over states rights. With deba'athification, Iraqis 
are struggling to come to terms with a vicious past. They are 
trying to balance fear that the Ba'ath party would one day 
return to power with the recognition that many former members 
of the party are guilty of no crime and joined the organization 
not to repress others but for personal survival. With 
provincial powers, they are grappling with very serious 
questions about what the right balance between the center and 
the periphery is for Iraq. Some see the devolution of power to 
regions and provinces as being the best insurance against the 
rise of a future tyrannical figure in Baghdad. Others see Iraq, 
with its complex demographics, as in need of a strong central 
authority.
    In short, we should not be surpised or dismayed that Iraqis 
have not fully resolved such issues. Rather, we should ask 
whether the way in which they are approaching such issues gives 
us a sense of their seriousness and ultimate capability to 
resolve Iraq's fundamental problems. Is the collective national 
leadership of Iraq ready to prioritize Iraq over sectarian and 
community interests? Can and will they come to agreement about 
what sort of Iraq they want?
    I do believe that Iraq's leaders have the will to tackle 
the country's pressing problems, although it will take longer 
than we originally anticipated because of the environment and 
the gravity of the issues before them. Prime Minister al-Maliki 
and the other Iraqi leaders face enormous obstacles in their 
efforts to govern effectively. They approach the task will a 
deep sense of commitment and patriotism. An important part of 
this positive judgment was the effort made by the leaders this 
past summer. After weeks of preparatory work and many days of 
intensive meetings, Iraq's five most prominent national leaders 
from the three major communities issued a communique on August 
26 that noted agreement on draft legislation dealing with de-
ba'athification and provincial powers. This agreement by no 
means solves all of Iraq's problems. But the commitment of its 
leaders to work together on hard issues is encouraging.
    Perhaps most significantly, these five Iraqi leaders 
together decided to publicly express their joint desire to 
develop a long-term relationship with the United States. 
Despite their many differences in perspectives and experiences, 
they all agreed on language acknowledging the need for a 
continued presence by the multinational forces in Iraq and 
expressing gratitude for the sacrifices these forces have made 
for Iraqis.

                     PROVINCIAL AND LOCAL POLITICS

    At the provincial level, political gains have been more 
pronounced, particularly in the north and west of Iraq where 
the security improvements have been in some places dramatic. In 
these areas, there is abundant evidence that the security gains 
have opened the door for meaningful politics.
    In al-Anbar, the progress on the security side has been 
extraordinary. Six months ago, violence was rampant, our forces 
were under daily attack, and Iraqis were cowering from the 
intimidation of al-Qa'ida. But al-Qa'ida overplayed its hand in 
al-Anbar and Anbaris began to reject its excesses--be they 
beheading school children or cutting off peoples' fingers as 
punishment for smoking. Recognizing the Coalition could help 
eject al-Qa'ida, the tribes began to fight with us, not against 
us, and the landscape in al-Anbar is dramatically different as 
a result. Tribal representatives are on the provincial council, 
which is now meeting regularly to find ways of restoring 
services, developing the economy, and executing a provincial 
budget. These leaders are looking for help to rebuild their 
cities and talking of attracting investment. Such scenes are 
also unfolding in parts of Diyala and Ninewa, where Iraqis have 
mobilized with the help of the Coalition and Iraqi security 
forces to evict al-Qa'ida from their communities. The world 
should note that when al-Qa'ida began implementing its twisted 
vision of the Caliphate in Iraq, Iraqis, from al-Anbar to 
Baghdad to Diyala', have overwhelmingly rejected it.
    Shi'a extremists are also facing rejection. Recent attacks 
by elements of the Iranian-backed Jaysh al-Mahdi on worshipers 
in the holy city of Karbala have provoked a backlash and 
triggered a call by Muqtada as-Sadr for Jaysh al-Mahdi to cease 
attacks against Iraqis and coalition forces.
    A key challenge for Iraqis now is to link these positive 
developments in the provinces to the central government in 
Baghdad. Unlike our states, Iraqi provinces have little ability 
to generate funds through taxation, making them dependent on 
the central government for resources. The growing ability of 
the provinces to design and execute budgets and the readiness 
of the central, government to resource them are success 
stories. On September 5, Iraq's senior federal leadership 
traveled to al-Anbar where they announced a 70% increase in the 
2007 provincial capital budget as well as $50 million to 
compensate losses in the fight against al-Qa'ida. The support 
of the central government is also needed to maintain hard-won 
security in areas like al-Anbar through the rapid expansion of 
locally-generated police. The Government of Iraq has placed 
some 21,000 Anbaris on police roles.

                    ECONOMICS AND CAPACITY BUILDING

    Iraq is starting to make some gains in the economy. 
Improving security is stimulating revival of markets, with the 
active participation of local communities. War damage is being 
cleared and buildings repaired, roads and sewers built and 
commerce energized.
    The IMF estimates that economic growth will exceed six 
percent for 2007. Iraqi ministries and provincial councils have 
made substantial progress this year in utilizing Iraq's oil 
revenue for investment. The 2007 governmental budget allocated 
$10 billion (nearly one-third Iraq's expected oil export 
revenue) to capital investment. Over $3 billion was allocated 
to the provinces and the Kurdish Region for spending. The 
latest data show that spending units (national ministries, and 
provincial councils) have proceeded to commit these funds at 
more than twice the rate of last year. Doing the best are the 
provincial authorities, in the process gaining experience with 
making plans and decisions, and running fair tenders. In so 
doing, they are stimulating local business development and 
providing employment. Over time we expect the experience with 
more responsive local authorities will change Iraqi attitudes 
towards their elected leaders, and of the provinces towards 
Baghdad.
    At two conferences in Dubai in the last two weeks, hundreds 
of Iraqi businessmen met an equal number of foreign investors 
newly interested in acquiring shares of businesses in Iraq. An 
auction of cell phone spectrum conducted by Pricewaterhouse 
Coopers netted the Government a better-than-expected sum of 
$3.75 billion. The Minister of Finance plans to use the funds, 
along with all the country's oil revenue, to apply to its 
pressing investment and current expenditure needs.
    Overall, however, the Iraqi economy is performing 
significantly under potential. Insecurity in the countryside 
raises transport costs and especially affects manufacturing and 
agriculture. Electricity supply has improved in many parts of 
the country, but is woefully inadequate in Baghdad. Many 
neighborhoods in the city receive two hours a day or less from 
the national grid, although power supplies for essential 
services such as water pumping stations or hospitals are much 
better. The Minister of Electricity said last week that it 
would take $25 billion through 2016 to meet demand 
requirements, but that by investing the $2billion a year the 
Ministry is now receiving from the government's budget, as well as 
private investment in power generation, that goal could be met.
    We are deploying our assistance funds to make a difference 
to ordinary Iraqis and to support our political objectives. 
Military units are using Commanders Emergency Response (CERP) 
funds to ensure that residents see a difference when 
neighborhood violence declines. USAID Community Stabilization 
Funds provide tens of thousands of jobs. With the recent 
apportionment of 2007 Supplemental funds, we are putting 
``Quick Response Funds'' in the hands of our Provincial 
Reconstruction Team leaders to build communities and 
institutions in post-kinetic environments. Vocational training 
and microfinance programs are supporting nascent private 
businesses. And in Baghdad, we are increasing our engagement 
and capacity building efforts with ministries.

                  REGIONAL AND INTERNATIONAL DYNAMICS

    There is expanding international and regional engagement 
with Iraq. In August, the UN Security Council, at Iraq's 
invitation, provided the United Nations Assistance Mission in 
Iraq (UNAMI) with an expanded mandate through UNSCR 1770. The 
work of the International Compact with Iraq moves forward, 
jointly chaired by Iraq and the UN. Seventy-four countries 
pledged support for Iraq's economic reform efforts at a 
Ministerial Conference in May. The UN has reported progress in 
75% of the 400 areas Iraq has identified for action. Later this 
month, the Iraqi Prime Minister and the UN Secretary General 
will chair a ministerial-level meeting in New York to discuss 
further progress under the Compact and how UNSCR 1770 can be 
most effectively implemented.
    Many of Iraq's neighbors recognize that they have a stake 
in the outcome of the current conflict in Iraq, and are 
engaging with Iraq in a constructive way. A neighbors' 
ministerial in May, also attended by the P-5 and the G-8, has 
been followed by meetings of working groups on security, border 
issues, and energy. An ambassadorial level meeting just took 
place in Baghdad, and another neighbors' ministerial will be 
held in Istanbul in October.
    Against the backdrop of these new mechanisms, the business 
of being neighbors is quietly unfolding. For the first time in 
years, Iraq is exporting oil through its neighbor, Turkey, as 
well as through the Gulf. Iraq and Kuwait are nearing 
conclusion on a commercial deal for Kuwait to supply its 
northern neighbor with critically needed diesel. Jordan 
recently issued a statement welcoming the recent leaders' 
communique and supporting Iraqi efforts at reconciliation. And 
Saudi Arabia is planning on opening an Embassy in Baghdad--its 
first since the fall of Saddam.
    Syria's role has been more problematic. On one hand, Syria 
has hosted a meeting of the border security working group and 
interdicted some foreign terrorists in transit to Iraq. On the 
other hand, suicide-bombers continue to cross the border from 
Syria to murder Iraqi civilians.
    Iran plays a harmful role in Iraq. While claiming to 
support Iraq in its transition, Iran has actively undermined it 
by providing lethal capabilities to the enemies of the Iraqi 
state. In doing so, the Iranian government seems to ignore the 
risks that an unstable Iraq carries for its own interests.

                             LOOKING AHEAD

    2006 was a bad year in Iraq. The country came close to 
unraveling politically, economically, and in security terms. 
2007 has brought improvement. Enormous challenges remain. 
Iraqis still struggle with fundamental questions about how to 
share power, accept their differences and overcome their past. 
The changes to our strategy last January--the surge--have 
helped change the dynamics in Iraq for the better. Our 
increased presence made besieged communities feel that they 
could defeat al-Qa'ida by working with us. Our population 
security measures have made it much harder for terrorists to 
conduct attacks. We have given Iraqis the time and space to 
reflect on what sort of country they want. Most Iraqis 
genuinely accept Iraq as a multi-ethnic, multi-sectarian 
society--it is the balance of power that has yet to be sorted 
out.
    Whether Iraq reaches its potential is of course ultimately 
the product of Iraqi decisions. But the involvement and support 
of the United States will be hugely important in shaping a 
positive outcome. Our country has given a great deal in blood 
and treasure to stabilize the situation in Iraq and help Iraqis 
build institutions for a united, democratic country governed 
under the rule of law. Realizing this vision will take more 
time and patience on the part of the United States.
    I cannot guarantee success in Iraq. I do believe, as I have 
described, that it is attainable. I am certain that abandoning 
or drastically curtailing our efforts will bring failure, and 
the consequences of such a failure must be clearly understood. 
An Iraq that falls into chaos or civil war will mean massive 
human suffering--well beyond what has already occurred within 
Iraq's borders. It could well invite the intervention of 
regional states, all of which see their future connected to 
Iraq's in some fundamental way. Undoubtedly, Iran would be a 
winner in this scenario, consolidating its influence over Iraqi 
resources and possibly territory. The Iranian President has 
already announced that Iran will fill any vacuum in Iraq. In 
such an environment, the gains made against al-Qa'ida and other 
extremists groups could easily evaporate and they could 
establish strongholds to be used as safehavens for regional and 
international operations. Our current course is hard. The 
alternatives are far worse.
    Every strategy requires recalibration as time goes on. This 
is particularly true in an environment like Iraq where change 
is a daily or hourly occurrence. As chief of mission in Iraq, I 
am constantly assessing our efforts and seeking to ensure that 
they are coordinated with and complementary to the efforts of 
our military. I believe that, thanks to the support of 
Congress, we have an appropriate civilian posture in Iraq. Over 
the coming year, we will continue to increase our civilian 
efforts outside of Baghdad and the international zone. This 
presence has allowed us to focus on capacity building, 
especially in the provinces--units which are likely to grow in 
influence as more power devolves from Baghdad. The number of 
Provincial Recanstruction Teams has grown from ten to 25 this 
year. In support of these goals, we will be asking Congress for 
additional economic assistance including additional quick 
response funds for capacity building. We will also seek support 
for two significant proposals that hold the prospect of 
creating permanent jobs for thousands of Iraqis. One would be 
the establishment of an ``Iraqi-American Enterprise Fund,'' 
modeled on our successful funds in Poland and elsewhere in 
Central Europe. Such a fund could make equity investments in 
new and revamped firms based in Iraq. The second would be a 
large-scale operations and maintenance facility based on our 
Highway Trust Fund. On a cost-sharing basis, such a fund would 
train Iraqis to budget for and maintain important public sector 
infrastructure (power plants, dams, roads). Over time, the 
cost-sharing would phase down and out, leaving behind well-
trained professionals and instilling the habits of preventative 
maintenance.
    We will continue our efforts to assist Iraqis in the 
pursuit of national reconciliation, while recognizing that 
progress on this front may come in many forms and must 
ultimately be done by Iraqis themselves. We will seek 
additional ways to neutralize regional interference and enhance 
regional and international support. And we will help Iraqis 
consolidate the positive developments at local levels and 
connect them with the national government. Finally, I expect we 
will invest much effort in developing the strategic partnership 
between the United States and Iraq, which is an investment in 
the future of both countries.

                                  
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