Why is this happening? The administration would argue that it is a consequence of the surge. And there's some truth to this. Violence is down, Al Qaeda in Iraq is weaker and American casualties are falling. Gen. David Petraeus's new strategy is working, though not exactly for the reasons initially advertised.

When the president announced the surge last January, I wrote a column arguing that it was likely to succeed militarily (by providing better security) but would probably fail politically (because of a lack of political reconciliation). I was both right and wrong. More U.S. troops have meant better security. But they are not at the heart of current improvements in Iraq. The key is that Petraeus has been willing to do what no American official has until now: accept Iraq for what it is and not what Washington wants it to be. Searching for a stable order, Petraeus has allied himself with whoever, within reason, could produce that order.

In insurgent-ridden Anbar he realized that the only way to effectively fight Al Qaeda in Iraq was to have allies within the Sunni community rather than to use a largely Shiite and Kurdish Army. That meant cozying up to Sunni tribesmen, even those with shady pasts. Several Sunni towns and neighborhoods report being given money, infrastructure and training directly by the United States. Petraeus has, in effect, given up hopes of Shiite leaders in Baghdad reconciling with Sunnis, and instead he's made up with them himself. The result has been that Al Qaeda in Iraq has been marginalized, Sunni leaders no longer demand an American withdrawal and the Shiites have recognized that America's support is not unconditional.

In the Shiite south, U.S. policy has abandoned the goal of an impartial government and has picked a side: Abdul Aziz al-Hakim's Islamic Supreme Council of Iraq (ISCI), which holds sway over most local governments in the region. We complain loudly about the infiltration of militias into the national police and Army, by which we have usually meant members of Moqtada al-Sadr's Mahdi Army. But we have been far more reluctant to weed out members of ISCI's militia, the Badr Brigades. Petraeus has even been somewhat accommodating of the Sadrists. In Baghdad, U.S. forces now primarily target "rogue" Mahdi Army militants. The more maintsream Sadrists have been tacitly allowed to operate in several Shiite areas. Of course, we've always been realistic about Kurdistan, where we have encouraged a quasi-independent state run by political parties with their own militias.

Back in Washington, President Bush continues to talk about Iraq's shining democracy in speeches that seem utterly detached from reality. This is a nation where 4.5 million people have fled their homes, ethnic cleansing has transformed whole cities and religious fanatics have imposed a theocratic rule that is often more extreme than in Iran. In much of the country, thugs rule the streets. The police chief of Basra told the Iraqi newspaper Al-Sabah last week, "Most of Basra's ports, especially Umm Qasr, are under the control of militia gangs. The police force is incapable of executing its duties because its members report to the militias." The central government is barely functioning. Half of the cabinet ministries are either vacant or nonfunctional. Iraq's oil production is down this year. Sectarian divisions are, in some ways, getting worse.

On the ground, far from Bush's rhetoric of transformation, these conditions have moved American policy toward realism. Will it work? For Iraq to genuinely recede as a campaign issue, this order has to endure. The balancing act-between Sunnis and Shiites, ISCI and the Mahdi Army, Arabs and Kurds-could easily collapse. As the United States draws down its troops, each of these various forces will try to gain the upper hand. A stable Iraq does not mean a pretty one. The ISCI are our allies but are also the most pro-Iranian element within the Shiite community. (Sadr's followers have historically been the most anti-Iranian.) Building up Sunni militias contributes to the fracturing of the country. But there are no great options here. Petraeus has at least moved the United States into a more flexible position, one that gives it leverage with all communities, allows it to adjust its tactics and forces the creation of local balances of power. It moves us closer toward what must now be the larger strategic objective-to create enough stability to allow the United States to reduce its exposure in Iraq.