Bremer has grown increasingly frustrated during his six-month tenure–not least because his bosses back in the White House and Defense Department haven’t appreciated how bad the guerrilla attacks have gotten. So he promptly got Condoleezza Rice on the phone. The national-security adviser, taking a rare Sunday afternoon off, was at the Redskins game at FedEx Field. Rice has been given more oversight of the Iraq problem as Bremer has chafed under Pentagon control and the White House has fretted that Donald Rumsfeld’s unforeseen “postwar” war could cost President George W. Bush the 2004 election. Now, talking to Bremer on her cell phone at the stadium, Rice realized America needed a whole new game plan. Bremer was rushed back to Washington–so abruptly, in fact, that he had to cancel an important meeting with one of America’s few allies in this fight, Poland’s prime minister (who was mildly miffed at not being alerted beforehand).

After a day and a half of intense talks with the president and other senior officials, the administration reversed itself. The Iraqis would have their way. A week after Bush’s much-noted speech calling for democracy in the Arab world, the president decided to compromise on a principle his administration had, just weeks ago, stoutly maintained (against the advice of the United Nations and Europeans). Bush and Bremer had insisted that before the Iraqis could run their own country, they’d have to create a proper constitution first, and only then hold national elections. Instead, as the United Nations and various influential former exiles like Ahmad Chalabi and Sunni power elites have long wanted, the Americans agreed to a kind of quasi democracy on the “Afghan model.” This involves selection of delegates for a National Assembly by tribal leaders and “notables” in Iraq’s 18 provinces. That body in turn would form a provisional government of elites by next June that will “assume full sovereign powers for governing Iraq,” according to an agreement released Saturday. This is to be followed by a constitutional convention, a referendum and then national elections–but not until 2005-06, when the Americans will have less control. The upshot is that Bush’s grand designs for Arab transformation now depend far more on Iraqis who may not share all his goals.

The minority Sunni elite in the Governing Council had, in effect, successfully filibustered the Shiite majority, stalling a direct vote. Democracy, too, works that way sometimes, as the majority Republicans in the U.S. Senate learn all the time. But the larger point is that together, the council members had put “Jerry” Bremer–who for months had insisted the Iraqis weren’t ready for governance–in his place. His Coalition Provisional Authority, which gave him MacArthur-like powers, is now destined to morph into a mere ambassadorial presence by June 30, 2004, when it is to dissolve (though U.S. troops will remain). Where not long ago the administration was thinking of ditching the Governing Council altogether, it is saying now the body represents “the blossoming of the Iraqi political process,” as one official put it last Friday. Sunni council member Adnan Pachachi was plainer: Bush is “responding to our desire” for political power and to end the occupation.

There’s no mystery behind the Bushies’ new eagerness to hand things over to the Iraqis–however it gets done. More Americans are dying, Iraqi support for the occupation is plummeting and the administration knew something dramatic had to change. Attacks have jumped from fewer than 10 a day in May to about 30 to 35 a day. Worse, they have gotten more deadly and sophisticated, with some 40 Americans and 19 Italians killed in the past few weeks. Last Saturday, two more U.S. helicopters crashed under fire, killing at least 17 Americans. The insurgents, believed to be mostly members of the old Baathist regime, are using vast quantities of Semtex, the plastic explosive; surface-to-air missiles, and other high-tech weapons. Even the bridge across the Tigris that Bremer proudly reopened in October has been closed again for security, reviving massive traffic jams that irritate Baghdadis no end.

Most worrisome of all, the insurgency is costing the occupation support among Iraqis, according to a CIA report leaked last week to The Philadelphia Inquirer and endorsed by Bremer. And the U.S. intelligence community increasingly believes the insurgency is not only organized, it may also be benefiting from detailed prewar planning by Saddam and his henchmen. It seems strategically designed to sap U.S. will and undermine the U.S. occupation.

So the administration finds itself needing to win over more Iraqis while it harshly crushes an insurgency in their midst, with tactics that don’t always make friends (most recently AC-130 and Apache strafing runs under Operation Iron Hammer). But even as they step up airstrikes, U.S. forces still seem to have very little idea of who they are battling for Iraqi hearts and minds, U.S. intelligence officials say. There are no hard suspects for most of the major terror attacks in Iraq that have occurred over the past several months. “Saddam Hussein’s strategy is working,” says Adel Abdul Mehti, the representative of the Supreme Council for the Islamic Revolution in Iraq on the Governing Council. “If he can stop the process through bombs and assassinations, he will succeed, not in returning to power–he’s finished forever–but in bringing the country to the point of civil war and chaos.” Rumsfeld, in some of his frankest remarks on the insurgency, said the guerrillas he once dismissed as “dead-enders” were “going to school on us.” He added that the ultimate test is, “Who’s going to outlast the other? And the answer is, we’re going to outlast them.”

Most Iraqis still do not endorse the insurgents, even in the Sunni Triangle in the center of the country, where many attacks occur. But Iraqis do seem to be hedging their bets. While Bush insisted again last week that “we’re not pulling out until the job is done, period,” many Iraqis believe Bush is looking for an exit strategy. In June, both Bremer and Lt. Gen. Ricardo Sanchez, the commander of U.S. forces in Iraq, frequently boasted that more and more Iraqis were coming forward to give the Coalition tips on the bad guys. That’s not something reporters in Baghdad hear any longer. Today, when someone starts setting up a mortar tube in their neighborhood, Iraqi witnesses are less likely to run to the CPA. Sanchez has acknowledged as much, saying last week that Saddam’s capture “would relieve the people of… the blanket fear that exists that keeps some Iraqis from cooperating with the Coalition.”

Ultimately America’s success or failure may depend less on Saddam’s fate than on Bremer’s diplomatic skills. The administration believes the best way to defeat the insurgency is to undercut it politically. And that means getting most Iraqis to accept the forthcoming provisional government as legitimate, thereby taking the edge off Iraqi anger over the occupation. With 23 years in the Foreign Service, Bremer is widely praised for his tough-mindedness, coolness under fire and ability to “multitask” as a negotiator. His job now is to convince Iraqis who hope to vote soon that democracy lite can work for the moment.

Bremer will retain some control well into 2004 as he supervises the formation of “organizing committees” for each province. In doing so, he must navigate between Sunni demands for power and Shiite demands for direct democracy–and both groups now realize they have far more leverage than before. The key will be to prevent the Sunnis and other minorities from seizing a disproportionate amount of power through town and village “caucuses” in coming months, while stalling any Shiite move to create an Islamic state. In other words, the Bush administration is grappling with exactly the kind of problems–Iraq’s piecemeal ethnic and religious makeup–that led some war skeptics to warn that democracy there might be impossible. “This is going to be hard work,” a senior White House official said Saturday. And Bremer has no “blueprint” from Washington, the official said; he’ll be making things up as he goes along.

Within the administration, a debate still rages over whether to insist on some kind of vote for the provisional government. Some officials are advocating elections only in untroubled areas. But since most of the violence is in the Sunni middle, that could leave Sunnis feeling disenfranchised and incite more support for the insurgency. Sheik Mahir Hussein Al Hamra, a Shiite Governing Council member, suggests that while the Shiites support the new plan now, they, too, could revolt if the Sunnis don’t turn against the insurgents. “The Shia community also contains a category of people who are not as moderate as the main part of the Shia community,” he says. The CIA report raises the scary possibility that Shiite radicals could end up in bed with Saddam-inspired Sunni insurgents.

Other Governing Council members are cynical about Bush’s real reason for a change in course. “They’re in a hurry, you know,” says Mahmoud Othman, who represents the Popular Union of Kurdistan on the council. “In America, this is an election year and they have to try to prepare something in Iraq to sell it to the American people and to the world. That’s obvious.”

How much politics actually plays in Bush’s about-face is unknown (the White House denies such considerations had any role). But no one can doubt any longer that the president is deeply engaged in the details of the Iraq problem. Bush himself, in fact, may have had a direct hand in one of the most disastrous decisions of the postwar period: the move to “de-Baathify” Iraq to the point of dismantling the entire Iraqi Army. U.S. officials now believe that former Iraqi Army officers are among the leaders of the insurgency. When Bremer arrived in Baghdad in mid-May, the insurgency was just getting started, and clots of former Iraqi troops were reappearing, asking to be remobilized. Bremer, who has been widely blamed for reversing the decision of his predecessor, Jay Garner, to hire such men and pay them, was warned he would cause chaos by demobilizing the Army instead. The CIA station chief told him, “That’s another 350,000 Iraqis you’re pissing off, and they’ve got guns.” According to one official who attended the meeting, Bremer replied: “I don’t have any choice… Those are my instructions.” Then Bremer added: “The president told me that de-Baathification is more important.”

Now Bush has begun to give on that point, too. As the administration rushes to create an Iraqi security force, it is no longer de-Baathifying or vetting backgrounds as it once did. Still, CENTCOM’s commander, Gen. John Abizaid, last week ridiculed the idea that the insurgency was preplanned by Saddam’s regime. “I think Saddam Hussein is one of the most incompetent military leaders in the history of the world,” he said. “To think that somehow or other he planned this is absolutely beyond my comprehension.” White House officials were less certain, suggesting that Saddam may have been involved in promoting the insurgency.

General Abizaid insists the insurgency is small, no more than 5,000 strong, but the CIA report suggests it could number as many as 50,000. “I’m not sure I’d say there’s a national-level resistance leadership. Not yet,” Abizaid said. (General Sanchez was a little more vague, saying there are “a few indicators that at least intent is operating at the national level.”) Intel officials who weeks ago dismissed reports and purported Iraqi secret documents that suggested Saddam had made elaborate plans for guerrilla war are now taking them very seriously. NEWSWEEK has obtained one such document, dated Jan. 23, 2003, and marked top secret. It lists 11 instructions–including sabotage, looting and the assassination of religious leaders (all of which have happened)–for pro-Saddam operatives to follow in the event of an invasion by “American British Zionist coalition forces.”

The document is marked with the seal of the Mukhabarat, Saddam’s intelligence service. Intelligence reports indicate that a secret “compartmented” unit within the Mukhabarat known as M-14, whose duties included monitoring terrorist groups and linking up with Baath militias when Saddam was in power, may have been instrumental in crafting some kind of master plan for a guerrilla campaign in the event of a U.S. invasion. Tahir Jalil Habbush al-Tikriti, Saddam’s intelligence chief, is still at large (he’s the “jack of diamonds”). Whether coordinated or not, recent major strikes seem to have followed a pattern. Coming against the United Nations, the Red Cross and the Italian carabinieri, they have had the effect of strategically isolating the United States and Britain. Even the loyal Japanese have reversed a decision to send troops.

So for the moment, Bush’s hopes rest on Bremer’s determined shoulders. At a recent press conference, the Iraqi administrator was asked by a questioner, “Admit it: you weren’t ready for the complexities and you didn’t understand the problems of Iraq.” To which Bremer replied, “It’s going to be a very long time before I admit either of these things.” What is clear is that he is learning more about the Iraqis every day.