ronger.

I

Assessment

There is no guarantee for success in Iraq. The situation in Baghdad
and several provinces is dire. Saddam Hussein has been removed from
power and the Iraqi people have a democratically elected government
that is broadly representative of Iraq's population, yet the
government is not adequately advancing national reconciliation,
providing basic security, or delivering essential services. The level
of violence is high and growing. There is great suffering, and the
daily lives of many Iraqis show little or no improvement. Pessimism is
pervasive.

U.S. military and civilian personnel, and our coalition partners, are
making exceptional and dedicated efforts--and sacrifices--to help
Iraq. Many Iraqis have also made extraordinary efforts and sacrifices
for a better future. However, the ability of the United States to
influence events within Iraq is diminishing. Many Iraqis are embracing
sectarian identities. The lack of security impedes economic
development. Most countries in the region are not playing a
constructive role in support of Iraq, and some are undercutting
stability.

Iraq is vital to regional and even global stability, and is critical
to U.S. interests. It runs along the sectarian fault lines of Shia and
Sunni Islam, and of Kurdish and Arab populations. It has the world's
second-largest known oil reserves. It is now a base of operations for
international terrorism, including al Qaeda.

Iraq is a centerpiece of American foreign policy, influencing how the
United States is viewed in the region and around the world. Because of
the gravity of Iraq's condition and the country's vital importance,
the United States is facing one of its most difficult and significant
international challenges in decades. Because events in Iraq have been
set in motion by American decisions and actions, the United States has
both a national and a moral interest in doing what it can to give
Iraqis an opportunity to avert anarchy.

An assessment of the security, political, economic, and regional
situation follows (all figures current as of publication), along with
an assessment of the consequences if Iraq continues to deteriorate,
and an analysis of some possible courses of action.

A. Assessment of the Current Situation in Iraq

1. Security

Attacks against U.S., Coalition, and Iraqi security forces are
persistent and growing. October 2006 was the deadliest month for U.S.
forces since January