The struggle in Iraq is between those who see sovereignty and elections as the only way out and those who want a prolonged impasse, writes Graham Usher from Baghdad On 14 February Iraqi insurgents pulled another trick from their bag of responses to the US-led occupation. In a morning raid in Fallujahh between 30-50 guerrillas laid siege to the town's police station, civil defence headquarters and mayor's office, leaving 27 dead (including 22 Iraqi policemen), 35 wounded and between 70-100 prisoners freed. The assault came three days after two suicide car bombings left over 100 Iraqis dead outside an army recruitment centre and a police station in Baghdad and Iskandariya, and two days after rocket-propelled grenades missed the head of US Command, John Abizaid, in Fallujah. The attacks represent a major blow to the US so-called Iraqification strategy, in which security is progressively handed over to new Iraqi police and army forces ahead of the scheduled transfer of sovereignty. They are not the only defeats. Contrary to official American assessments that the capture of Saddam Hussein would help turn the tide against the insurgency, a USAID internal review concluded January saw "the highest rate of violence since September 2003". It warned that unless the security, economic and infrastructure improve there is a real fear of the "Balkanisation" of Iraq. Nor is it clear whether the upsurge in violence squares with the document US officials believe outlines the resistance strategy in the coming months -- at least as advocated by its radical Islamist stream. Allegedly drafted by Abu Musab Al-Zarqawi -- a Jordanian suspected of ties to Al-Qa'eda -- it calls for a "sectarian war" between Iraq's Sunni and Shi'a Muslims as a means of rallying the Sunnis behind the Islamist cause and thus "prolonging the duration of the fight between the infidels and us". In the "near future", however, the task is to target the "Iraqi troops, police and their agents". Do recent attacks on Iraqi army and police bases confirm this prognosis? Despite initial reports that Lebanese and Iranians were involved in the Fallujah raid it now appears the attackers were Iraqis, fuelled by a lethal but indigenous mix of a tribal Islamism and Ba'athist military know-how. At least one resistance group (the Mujahedeen of Fallujah) denounced the raid as "carried out by a rabble that has nothing to do with religion", suggesting foreign provenance. The Mujahedeen also announced a freeze on all attacks on Iraqi police and army. The dichotomy between an indigenous resistance and outside or "foreign fighters" may now be a false one, says Barham Salih, prime minister of the Patriotic Union of Kurdistan (PUK) government in northern Iraq. "We were always dealing with two sources of threat. One represented the remnants of Saddam Hussein's regime. The other is Al-Qa'eda and its surrogates. The strategic threat to Iraq and Iraqi security is the so-called Islamic terror. And the acts of terrorism we see now are being done by Al-Qa'eda, coming mainly from outside but assisted by former Ba'athists and some of the radical Iraqi Islamic fundamentalist groups here, like Ansar Al- Islam. What you see in the press about Zarqawi is credible and you should take it seriously. I think it reflects accurately the current Al-Qa'eda strategy. Al-Qa'eda knows that if we succeed in building a democratic society here, it will deliver a major setback to terrorism and the reactionary ideology Al-Qa'eda represents." Salih should know. The Zarqawi document was initially obtained by Kurdish peshmergar military forces following their capture of Hassan Ghul, a courier who confessed the document was being conveyed from Ansar Al-Islam to Al- Qa'eda's leadership abroad. Salih says the remedy is implicit in the "important statement" the document makes -- that a sectarian war is necessary because Iraq's Sunnis are not rallying behind the call for Jihad and that once genuine sovereignty and democracy comes to Iraq the call will fall on deaf ears. For then (in the words of the document) "how can we kill their [Iraqi army and police] cousins and sons after the Americans start withdrawing? The Americans will continue to control from their bases, but the sons of this land will be the authority. This is the democracy, we will have no pretext." Many on Iraq's Governing Council (IGC) are starting to see the urgent need to remove the pretext. At the end of this week UN Secretary-General Kofi Annan is expected to pronounce on the report by his recent envoy to Iraq, Lakhdar Ibrahimi, on whether elections are possible before the 30 June deadline. He will almost certainly declare they are not. But he may indicate that elections for a legislative assembly could be arranged before their scheduled date at the end of 2005. If so there is likely to be a solid consensus against the US- designed caucus system. Iraqi leaders on the IGC appear to be coalescing around a transfer of power to the existing IGC but expanded to include "credible Sunni nationalist leaders", in the words of one Coalition Provisional Authority official. This would mean another defeat for US strategy, which has been at pains to disentangle the Iraqi electoral timetable from the US presidential one. But it would probably satisfy Shi'a religious leader, Grand Ayatollah Ali Sistani, whose repeated calls for direct elections for a legislative assembly have pitched US plans into crisis. Muwaffak Rubaie, an IGC member close to Sistani, has said the Ayatollah would accept a transfer of sovereignty to the existing IGC "for a few months" as long as elections are held and the caucus system abolished. Sunni Arab and Kurdish leaders are starting to agree. "It's not ideal, but it is much better than having them [elections] right away," said Iraq's foreign minister and senior leader in the Kurdish Democratic Party, Hoshyar Zubari. On 15 February IGC member and PUK leader Jalal Talabani said "elections are the best way to express the opinions of the Iraqi people" and that the IGC should assume sovereignty until elections are held. It is a position increasingly at one with the Shi'a religious parties on the IGC, who may have their own political reasons for wanting elections sooner rather than later, but who are also acutely aware of the crisis of legitimacy that has plagued the IGC since its inception. "It is clear to all that the current IGC cannot govern the Iraqi people," says Humam Hammudi, a leader in the Supreme Council for the Islamic Revolution in Iraq. "The next Iraqi government will have to. It has to win the trust of the Iraqi people so that they will accept its decisions. The only way trust can be established is through elections."