Financial T'imes - September 10 2004: This week a macabre milestone was passed in Iraq. More than 1,000 American soldiers have now been killed since the US-led invasion of the country began nearly 18 months ago. The overwhelming majority lost their lives after President George W. Bush declared major combat operations over in his now infamous "Mission Accomplished" photo-opportunity in May last year.

In that time, an unknown number of mostly civilian Iraqis, certainly not less than 10,000 and possibly three times that number, have perished, and hundreds more are dying each week. After an invasion and occupation that promised them freedom, Iraqis have seen their security evaporate, their state smashed and their country fragment into a lawless archipelago ruled by militias, bandits and kidnappers.

The transitional political process, designed to lead to constituent assembly and general elections next year, has been undermined because the nervous US-dominated occupation authority has insisted on hand-picking various permutations of interim Iraqi governors, mostly exiles or expatriates with no standing among their people. Whatever Iraqis thought about the Americans on their way in - and it was never what these emigré politicians told Washington they would be thinking - an overwhelming majority now views US forces as occupiers rather than liberators and wants them out.

The aftermath of a war won so quickly has been so utterly bungled, moreover, that the US is down to the last vestiges of its always exiguous allied support, at the time when Iraq needs every bit of help it can get. The occupation has lost control of big swathes of the country. Having decided that all those who lived and worked in Iraq under Saddam Hussein bore some degree of collective guilt, Washington's viceroys purged the country's armed forces, civil service and institutions to a degree that broke the back of the state, marginalised internal political forces, sidelined many with the skills to rebuild Iraq's services and utilities and, of course, fuelled an insurgency US forces have yet to identify accurately, let alone get to grips with.

There are signs that US officials are beginning to "get it" - in the phrase Donald Rumsfeld, US defence secretary, patronisingly used this week to characterise Iraqis' grasp of the security situation. But if they are increasingly aware that what they have created in Iraq is a disaster, they seem at a loss to know what to do about it.

The core question to be addressed is this: is the continuing presence of US military forces in Iraq part of the solution or part of the problem?

As occupying power, the US bears responsibility for Iraq under international law, and is duty-bound to try to leave it in better shape than it found it. But there is no sign of that happening.

The time has therefore come to consider whether a structured withdrawal of US and remaining allied troops, in tandem with a workable handover of security to Iraqi forces and a legitimate and inclusive political process, can chart a path out of the current chaos.

Faced with a withdrawal timetable, Iraqis who currently feel helpless will know that the opportunity to craft a better future lies in their hands.

Take security. Iraqi forces are being rebuilt to take over front-line tasks. This is slow work, but that is not the real problem. It is that those forces already trained cannot stand alongside a US military that daily rains thousands of tonnes of projectiles and high explosives on their compatriots. Each time there is a siege of Fallujah or Najaf, with the US using firepower that kills civilians by the hundred, these Iraqi forces melt away. Until eventual withdrawal, there would have to be a policy of military restraint, imposed above all on those US commanders who have operated without reference to their own superiors, let alone the notionally sovereign Iraqi government.

Politically, if next year's elections are to have any chance of reflecting the will of the Iraqi people, the process must be opened up. Last month's national conference or proto-assembly was monopolised by expatriate politicians aligned with the interim government of Iyad Allawi. The only way national coalitions can be woven from Iraq's religious and ethnic patchwork is by including the opposition to the occupation. That means negotiating with the insurgents, probably through religious leaders of the stature of Ayatollah Ali al-Sistani. It also means an amnesty, which should help Iraqi authorities acquire the legitimacy to crush jihadist and other hold-outs.

Ideally, the US would accompany withdrawal by stating it has no intention of establishing bases in Iraq, and instead wishes to facilitate regional security agreements. That would be more stabilising than the current policy of bullying neighbours such as Iran and Syria, whose borders with Iraq the US in any case cannot control.

None of this will be less than messy. But whether Mr Bush or John Kerry wins the upcoming election, the US will eventually have to do something like this. Chaos is a great risk, and occupiers through the ages have pointed to that risk as their reason for staying put. But chaos is already here, and the power that is in large part responsible for it must start preparing now to step aside and let the Iraqis try to emerge from it.