BAGHDAD, Iraq (AP) — The new Iraqi government and its American patrons should have been basking in the glow of a two-week blitz of good news.

Violence had eased significantly in the Iraqi capital from a security crackdown that blanketed the chaotic city with 75,000 U.S.-backed Iraqi soldiers.

President Bush paid a surprise visit to Prime Minister Nouri al-Maliki in a show of support for an Iraqi government that emerged from an agonizing six-month birth.

Most dramatically, al-Qaida in Iraq lost its leader when Abu Musab al-Zarqawi — the brutal terrorism boss — was killed by a U.S. air strike.

But insurgents have counterattacked, scuffing the sheen of progress.

By week’s end al-Maliki’s government was forced to declare a state of emergency and shoo its citizens off Baghdad’s streets with two hours notice after the tenacious insurgency took the offensive Friday along Haifa Street, just blocks from Iraq’s seat of government.

Two days earlier, one of the defense lawyers for Saddam Hussein and his co-defendants was kidnapped from his home by men wearing Interior Ministry uniforms and flashing genuine-looking credentials. He was found slain in Sadr City, Baghdad’s Shiite Slum — the third defense attorney to be murdered since the trial started.

On Tuesday, the bodies of two captured American soldiers were recovered — beheaded and surrounded by booby traps. And al-Zarqawi’s successor, Abu Hamza al-Muhajer, said he conducted the brutal slayings.

At least 14 other U.S. soldiers or Marines died in combat or insurgent bombings in a particularly bloody week for the military.

Bruce Hoffman, a counterterrorism expert at Rand Corp., said the good news side of the balance sheet, when seen as a whole, is a “significant step forward, at least in the immediate sense.”

“But the facts on the ground have not really changed one iota. It was just one brick in the wall. It (the al-Zarqawi killing) was decisive, but the rest of the machine (al-Qaida in Iraq) remains intact,” he said in telephone interview.

In recent months, the Bush administration increasingly has acknowledged that it will be years before Iraq is a truly stable and democratic nation. But that goal, at present, appears to be receding even as progress is made against the Sunni-dominated insurgency that has killed hundreds of U.S. soldiers and thousands of Iraqis.

Criminal gangs and sectarian militias are rapidly filling a security vacuum created by the lack of a trustworthy police force. The Interior Ministry, a Shiite-run agency that controls police forces, is rife with militiamen bent on revenge killings, shakedowns and kidnapping for ransom.

“Sectarian and ethnic violence has come to rival the insurgency in terms of casualties and the threat it poses to political, social and economic progress in Iraq,” security analyst Anthony H. Cordesman writes in an advance copy of a book he is writing at the Center for Strategic and International Studies.

“There is less and less difference between insurgency and civil war, and all sides are to some extent guilty of terrorism,” he says.

The breakdown of civil conventions and trust impose a fundamental and nearly unbearable strain on the Iraqi people. Their misery was detailed in a recent confidential memo from the U.S. Embassy in Baghdad to the State Department.

The collection of anecdotes from Iraqi workers in an undisclosed office in the embassy painted an extraordinarily bleak picture of life in the capital, where local employees do not dare reveal where they work, even to family members, for fear of retribution.

“Employees all share a common tale: of nine employees in March, only four had family members who knew they worked at the embassy. Iraqi colleagues who are called after hours often speak in Arabic as an indication they cannot speak openly in English,” the memo said.

Given the increasing difficulties, the writer of the cable concluded:

“Although our staff retain a professional demeanor, strains are apparent. We see their personal fears are reinforcing divisive sectarian or ethnic channels. Employees are apprehensive enough that we fear they may exaggerate developments or steer us toward news that comports with their own world view. Objectivity, civility, and logic that make for a functional workplace may falter if social pressures outside the Green Zone don’t abate.”

Neighborhoods in Baghdad and throughout the country are increasingly under the control of Shiite or Sunni militias, imposing their will on residents and forcing out those who are in the minority or don’t toe an often fundamentalist Islamic line.

Still, there has been progress in pacifying Iraq and establishing a modicum of democracy, leaving some experts to say U.S. success is a 50-50 proposition right now.

“In short,” Cordesman writes, “the odds of insurgent success are at best even.”

To better its odds, he says, Washington “will have to slow its plans to reduce its military presence, adjust to new threats and intensify its efforts to reshape effective security and police forces.”

That will test the mettle of the Bush administration with its Republican allies facing a midterm congressional election in four months and voters increasingly uneasy about the war.

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Associated Press correspondent Steven R. Hurst has covered Iraq since 2003.

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