BAGHDAD -- Former Sunni insurgents are signing up to fight al-Qaida, Shiite militias have toned down attacks, commerce is reviving and monthly casualty counts are falling. But the failure of Iraq's leaders to strike power-sharing deals raises questions whether the progress can survive after America begins sending its troops home next year.
Nearly a year after the US gambled by pouring troops into Iraq's capital, there is finally cause for hope that the worst of the Iraq war may have passed, even if the endgame takes longer than Americans and Iraqis want.
The political rivalries between Sunnis and Shiites that fueled the conflict remain unresolved. And time may be running out for America to midwife a solution.
By July, the United States expects to withdraw all five combat brigades that were rushed to Iraq this year by President Bush to quell a tide of Sunni-Shiite slaughter that threatened to tear apart the country.
Also by mid-2008, US and Iraqi officials hope to finish negotiations on a new deal that will shift more power to the Iraqis and probably reduce Washington's ability to influence decisions by Iraq's sectarian-minded leaders.
The security turnaround over the past three months has been startling.
In November 2006, at least 2,250 Iraqis were killed in political violence. Last month, the death toll was 718.
American deaths are down too, plunging from 126 in May to fewer than 40 for both October and November -- even though 2007 is the deadliest year of the war for US forces.
Thousands of Iraqis who fled the country are now returning. Areas of Baghdad that were ghost towns only a few months ago are reviving. Shoppers stroll the streets with their children.
"I think next year will be better because the situation is improving every day," said Firas Adel, a Shiite clothing merchant. "More people are returning to their homes and businesses. There is sense of safety and stability, and this will boost the economy."
Defense Secretary Robert Gates, in an early December stop in Iraq, was even able to project a sense of optimism that would have seemed ludicrous at the beginning of the year. "I believe that a secure, stable Iraq is within reach," Gates said. But he added: "We need to be patient."
The relative calm in Baghdad, Anbar and other battlefronts is fragile; fighting still rages in key areas not far from the capital. Bombs explode nearly every day in Baghdad, but draw little attention unless they cause multiple casualties.
Furthermore, Shiite and Sunni extremists groups, including al-Qaida in Iraq, have been battered but not destroyed. Al-Qaida fighters forced out of Baghdad are trying to regroup in northern Iraq and in the Euphrates Valley near Haditha to the west.
Other armed groups are believed laying low, waiting for the US drawdown to return to the streets.
"There are good stories to tell here in terms of returning Iraqis. There are economic developments that are occurring that need to be reported. But I would do it at a measured pace," US military spokesman Rear Adm. Gregory Smith counseled journalists recently.