"Our coalition is standing with responsible Iraqi leaders as they establish growing authority in their country," the president recently said.

But a closely held memo from within the U.S.-led occupational government in Iraq paints a much different picture. The author, a U.S. official assigned to the governing Coalition Provisional Authority, says bungling by the United States and its few allies has created a situation far worse than the American public knows. The report portrays an Iraq rife with corruption and sectarianism--a nation plummeting toward civil war.

The memo, made public on several newspaper websites Tuesday, comes as the White House has had to respond to daily setbacks.

On Sunday, administration officials conceded that Iraqi security forces won't be ready to take over policing responsibilities from U.S. forces on June 30, the date the U.S. is supposed to return sovereignty to the country. On Monday, Spain's new prime minister spoke to Bush, confirming his plan to yank his country's 1,300 troops from the coalition forces in a matter of weeks.

U.S. Sen. Ron Wyden says the numerous problems outlined in the memo--civil and religious unrest in Iraq, growing Iranian influence, infrastructure failures and massive costs--were predicted before the war.

"They shouldn't surprise anyone except those blinded by the Pollyanna-ish predictions of Iraqi exiles exhorting America to invade," says the Oregon Democrat, who voted against authorizing U.S. troops in Iraq. "What is a surprise is how consistently the administration downplays these problems in its public statements even as conditions grow more severe and more American lives are lost."

The memo, written in March, was provided to this reporter by a Western intelligence official, with sections deleted to protect the author's identity and "avoid inflaming an already volatile situation" by revealing the names of certain Iraqi figures.

The wide-ranging, acerbic critique of the occupation is especially significant because, according to the intelligence official, the author is a steadfast advocate of "regime change" in Iraq.

Signs of the author's continuing support for the U.S. invasion and occupation are all over the memo, which was written to a superior in Baghdad and circulated among other occupation officials.

The memo praises Iraqi National Congress leader Ahmed Chalabi, a longtime favorite of Washington hawks. (Chalabi was tried and convicted in absentia by the Jordanian government for bank embezzlement in 1989, and he has come under fire more recently for peddling dubious pre-war intelligence to the United States.)

The author also asserts that "what we have accomplished in Iraq is worth it." His outlook on certain scenarios, recorded just a few weeks ago, is improbably sunny. He writes that the arrest of radical Shiite cleric Muqtada al Sadr would cause "two or three days" of violence. Given that coalition forces' attempt to stop al Sadr and his militia have resulted in weeks of bloody conflict, the prediction seems Pollyanna-ish at best.

Yet the memo is gloomy in most other respects. It says Iraq is mired in dysfunction and corruption. It says the occupational government "handle[s] an issue like six-year-olds play soccer: Someone kicks the ball and one hundred people chase after it hoping to be noticed, without a care as to what happens on the field."

Most disturbingly for U.S. troops, policy makers and citizens, the memo asserts that this approach has sown the seeds for civil war across the country. It goes on to argue that "the trigger for a civil war" is not likely to be an isolated incident of violence, but the result of "deeper conflicts that revolve around patronage and absolutism."

Congressman Peter DeFazio, an outspoken critic of the war, says the memo raises additional questions about the Administration's bungled efforts to set up a civilian government within Iraq.

"What we still don't understand is what they were thinking," says the Lane County Democrat. "Were they snookered by Ahmed Chalabi, who said our forces would be greeted with flowers, that we'd be there for a little while and soon democracy would bloom? Did he simply manage to pull the wool over the eyes of the whole administration?"

The memo is particularly pointed on the subject of the Iraqi Governing Council. This provisional body of 25 hand-picked Iraqis is supposed to pave the way for a new, sovereign Iraqi government, slated to take over on June 30. As part of the process, the council appointed new staff for the country's national ministries.

"In retrospect," the memo asserts, "both for political and organizational reasons, the decision to allow the Governing Council to pick 25 ministers did the greatest damage. Not only did we endorse nepotism, with men choosing their sons and brothers-in-law; but we also failed to use our prerogative to shape a system that would work....[O]ur failure to promote accountability has hurt us."

The memo's author blasts the Coalition Provisional Authority, the multinational government headed by American diplomat L. Paul Bremer and staffed by officials from the United States and allied nations. The CPA is based in a heavily guarded section of Baghdad--where Saddam Hussein once ruled from his palace--known as the "Green Zone." (The rest of Iraq constitutes the "Red Zone.") The memo says this bunker mentality has contributed to the potential for disaster in Iraq.

"Bremer has encouraged re-centralization in Iraq," the author writes, "because it is easier to control a Governing Council less than a kilometer away from the Palace, rather than 18 different provincial councils who would otherwise have budgetary authority."

The net effect, he continues, has been a "desperation to dominate Baghdad, and an absolutism born of regional isolation."

The memo also derides the U.S. government for spending "millions importing sport utility vehicles which are used exclusively to drive the kilometer and a half" between CPA and Governing Council headquarters. "We would have been much better off with a small fleet of used cars and a bicycle for every Green Zone resident," the author writes.

He also maintains that the Green Zone itself is "less than secure," both for Westerners and Iraqis.

"Screening for Iranian agents and followers of Muqtada al Sadr is inconsistent at best," he writes. No one is there to "prevent people from entering the parking lot outside the checkpoint to note license plate numbers of 'collaborators.'" The memo adds that ordinary Iraqis fear that the Green Zone's custodial staff take note of who comes and goes. Fearing reprisals, they avoid Americans.

The memo also derides CPA officials' use of heavily armed security personnel. "It is ingrained in the Iraqi psyche to keep a close hold on their own thoughts when surrounded by people with guns," the memo notes. "American officials create a spectacle of themselves, with convoys, flak jackets, fancy SUVs."

DeFazio says the bunker mentality of the CPA was evident in January, when he traveled to Iraq and met with Bremer and non-governmental organizations doing relief work. "I met with NGO people and contractors, and they were very critical of that approach," he says. "They'd say, 'There are NGO people all through these towns, and they never see CPA people.' And that's a real problem--how can you administer a country when you won't leave your compound?"

The memo does offer an encouraging and appealing picture of free Baghdad: thriving businesses and patrons on the streets. But it insists that "the progress evident happens despite us rather than because of us," and reports that "frequent explosions, many of which are not reported in the mainstream media, are a constant reminder of uncertainty."

Indeed, while boosters of the Iraqi invasion delight in the phrase "25 million free Iraqis," this newfound liberty does not include freedom from fear.

"Baghdadis have an uneasy sense that they are heading towards civil war," the memo says. "Sunnis, Shias, and Kurd professionals say that they themselves, friends, and associates are buying weapons fearing for the future."

The memo also notes that while Iraqi police "remain too fearful to enforce regulations," they are making a pretty penny as small-arms dealers.

The Coalition Provisional Authority "is ironically driving the weapons market," it reveals. "Iraqi police sell their U.S.-supplied weapons on the black market; they are promptly re-supplied. Interior ministry weapons buy-backs keep the price of arms high."

The CPA memo recommends taking action against at least four Iraqi ministers whose names have been deleted from the document. (Though there may be no connection, two weeks ago, Interior Minister Nuri Badran abruptly resigned, as did Governing Council member Iyad Allawi.)

Also deleted is the name of a minister whose acceptance of "alleged kickbacks... should be especially serious for us, since he was one of two ministers who met the President and had his picture taken with him." (The only Iraqi ministers photographed with President Bush are Iraqi public-works minister Nesreen Berwari and electricity minister Ayhem al-Sammarai.)

Developing this theme, the memo asserts that the U.S. "share[s] culpability in the eyes of ordinary Iraqis" for engendering Iraq's currently cronyistic state; since "we appointed the Governing Council members...their corruption is our corruption."

The author then notes that two individuals--names again deleted--have successfully worked to exclude certain Shiite elements from the new government.

"[The Coalition] had assured Iraqis that exclusion from the Governing Council did not mean an exclusion from the process," the author writes. "As it turns out, we lied. People from Kut [a city south of Baghdad recently besieged by Shiite forces loyal to Muqtada al Sadr], for example, see that they have no representation on the Governing Council, and many predict civil war since they doubt that the Governing Council will really allow elections."

"I think it's a big jump to say that just because people in Kut are not represented on the Governing Council that they will automatically support civil war," says Susan Laarman, a spokeswoman for Mercy Corps, a Portland-based international relief agency active in and around that troubled city. "What we know most about is local politics, and clearly, Iraq is striving toward a better-developed governance system."

The memo says that fanning the embers of distrust is the United States' failure to acknowledge that key Governing Council members owe their prominence not to political success but the muscle of personal militias and patronage. The memo uses Kurdish leaders, who control Iraq's northern provinces, as an example.

"We have bestowed approximately $600 million upon the Kurdish leadership," the author writes, "in addition to the taxes which we have allowed them to collect illegally."

He adds that he recently spent an evening with a Kurdish contact watching the Godfather trilogy: "[T]he entire evening was spent discussing which Iraqi Kurdish politicians represented which [Godfather] character."

The memo also blasts other aspects of occupation rule in Iraq. It characterizes the Coalition's policies regarding Iraq's porous borders, for instance, as "completely irrelevant."

"It is undeniable that a crumbling Baathist regime did better than we have" in that regard, the author asserts. The memo recommends that the U.S. "deploy far greater numbers [of soldiers] than we have now" to the borders.

The CPA's press operation--headed by Dan Senor, Bremer's senior communications adviser, who's seen by many as little more than a White House hack--doesn't escape the memo writer's criticism, either. The press office, he says, has made a bad political situation worse by "promoting American individuals above Iraqis."

By and large, the March memo validates many points raised by career military, diplomatic and intelligence officers before the war. For them, lack of planning for post-war stabilization was a matter of deep concern.

Among the more informed and prescient in this camp is retired U.S. Air Force Col. Sam Gardiner, a longtime National War College instructor and war-games specialist who asserted in February 2003 that "the military is not prepared to deal with [Bush's] promises" of a rapid and rosy post-war transition in Iraq.

Gardiner is an expert on the protracted difficulties in rebuilding Kosovo's electrical grid after NATO's bombing of the Serbian province in 1999. Before the Iraq war, he assessed the likely effect of hostilities on Iraq's power system. His assessment was not optimistic. It was also hardly unknown: He briefed ranking administration officials, including senior Pentagon figures and Iraq policy leaders.

Bremer, the occupation chief, has repeatedly said that Iraq's electricity situation has vastly improved. The March memo says otherwise. "Street lights function irregularly and traffic lights not at all," the memo states. "Electricity in Baghdad fluctuat[es] between three hours, on and off, in rotation, and four hours on and off."

"I continue to get very upset about the electricity issue," Gardiner said last week, after reading the memo. "I said the electrical system was going to be damaged, and damaged for a long time, and that we had to find a way to keep key people at their posts and give them what they need. Frankly, if we had just given the Iraqis some baling wire and a little bit of space to keep things running, it would have been better. But instead we've let big U.S. companies go in with plans for major overhauls."

The memo also validates key points of a February 2003 U.S. Army War College report, which said that "the possibility of the United States winning the war and losing the peace is real and serious." It forecast a scene in which religious and ethnic blocs supported by militias would complicate a transition to functional democracy. That prediction seems to be coming true. According to a Washington, D.C.-based senior military official, the occupation government estimates there are at least 30 separate militias active in Iraq.

And then there's Iran.

According to the memo, "Iranian money is pouring in" to occupied Iraq, particularly the southern area under British control. According to senior U.S. intelligence and military officials queried on this point, the Iranian influence in Iraq is both real and formidable, and the United States is, as one put it, at best "catching up" in the battle for influence.

That battle has proven costly. As of Tuesday, 99 U.S. troops had been killed in April, making it the deadliest month in Iraq since last year's invasion.

Sen. Wyden says that with approaching June 30 deadline for transferring government control, Bush needs explain how he plans to stop the violence. "With so many young Oregonians and Americans in the line of fire in Iraq, they deserve an answer to these critical questions," Wyden says. "But have no illusions--the challenges of Iraq will not end on July 1."

Jason Vest is a senior correspondent for The American Prospect, a liberal political journal based in Washington, D.C. His book on the current Bush administration and national security will be published in 2005. This piece was commissioned by the Association of Alternative Newsweeklies for use by its members. This version was edited by Willamette Week, with additional local reporting by Zach Dundas.

* The Coalition Provisional Authority is the civilian occupational government established after Saddam Hussein's overthrow last year. An after-the-fact United Nations resolution recognized the CPA as Iraq's legal government. The United States and Britain lead the CPA. The Authority is supposed to dissolve on June 30, the U.S.-declared date for the transfer of sovereignty to an as-yet-undetermined Iraqi government. The Authority's website is www.cpa-iraq.org .

* Organized in 1992, the Iraqi National Congress is an umbrella group of Iraqi organizations that opposed Saddam's rule.

* Ahmed Chalabi, the group's leader, has long been identified with a hawkish cadre of Bush administration and Pentagon officials. He is not thought to be widely popular within Iraq.

* L. Paul Bremer is the head of the Coalition Provisional Authority. A 62-year-old career State Department and Foreign Service hand, Bremer served as ambassador to the Netherlands and Ambassador-at-Large for Counterterrorism under Ronald Reagan.

* Earl Blumenauer, the Democratic representative for the Portland metro area's east side, is a member of the House International Relations Committee.

* The Green Zone is a section of Baghdad's central city anchored by Saddam's former presidential palace and other major governmental buildings. The CPA and Iraqi Governing Council are both based in the Green Zone. According to the website GlobalSecurity.org, the Green Zone is "defended with coils of razor wire, chain-link fences, earthen berms and armed checkpoints...M1 Abrams tanks, Bradley fighting vehicles and HUMVEEs with .50 caliber machine guns on top."

* The Iraqi Governing Council is a group of 25 Iraqis chosen last July by the Coalition Provisional Authority to facilitate the hand-over of power to a new Iraqi government. It is composed of representatives of many major ethnic, political and religious factions. Ahmed Chalabi of the Iraqi National Congress is a member.

* Kut is a major city in Shiite-dominated southern Iraq, approximately 100 miles southeast of Baghdad.

* The Baath Party was the nationalist, socialist, secularist party led by Saddam Hussein.

* Muqtada al Sadr is the son of a Shiite grand ayatollah assassinated by Saddam. Though he has no formal standing within the traditional Shiite hierarchy, al Sadr is the leader of a militia called the Imam Mehdi Army, which has been fighting U.S. and allied forces. Al Sadr's faction published a newspaper, Al Hawza, which the Coalition Provisional Authority shut down on March 28. He is wanted on murder charges relating to the April 2003 assassination of another Shiite leader. He is thought to be about 30 years old.

* The U.S. Army War College's website is www.carlisle.army.mil .

* British forces are in charge of the southern Iraqi city of Basra and the surrounding region. According to an article published Sunday in The Scotsman, the forces' commander predicts British troops will be in Iraq for a decade.