WASHINGTON – In a blunt repudiation of President Bush’s war policies, the bipartisan Iraq Study Group declared Wednesday that the situation in Iraq is “grave and deteriorating” and urged a new course to stave off potential catastrophe across the Middle East.

The high-level panel, in a long-awaited report, urged Bush to abandon his open-ended commitment to Iraq, begin transitioning U.S. combat forces out of the country and force Iraq’s government to take more responsibility for the country’s fate. Under the plan, most U.S. combat forces would be gone by the first quarter of 2008.

It also called for a major new White House-led diplomatic offensive in the Middle East aimed at Iraq’s neighbors. The initiative would include talks with Iran and Syria, which Bush has been cool to, and a much more muscular effort to broker peace between Israel and the Arabs.

It remains far from clear whether Bush will accept the recommendations in the report, which amount to a direct challenge to the heart of his defense and foreign policies.

Even if he does, there’s no guarantee of success, acknowledged the panel’s five Republicans and five Democrats, led by former Secretary of State James A. Baker III and retired Indiana Democratic congressman Lee Hamilton.

“We believe that the situation in Iraq today is very, very serious. We do not know if it can be turned around, but we think we have an obligation to try,” Hamilton said at a press conference.

Baker emphasized that the group’s 79 recommendations must be implemented as a package for the plan to work – a tall order for Iraqis and Americans.

Bush met with the study group at the White House early Wednesday, hours before its 142-page report, titled “The Way Forward – A New Approach,” was made public.

He called it “a very tough assessment of the situation in Iraq,” but he didn’t immediately endorse its findings.

Panel member Lawrence Eagleburger, a former secretary of state in Bush’s father’s administration, predicted that Bush would “seriously consider” the report. But he was cautious about whether the president would shift course.

“Since this report does make a number of recommendations that were not his cup of tea a while ago, I just don’t know,” Eagleburger said in a brief interview.

But the report, adopted unanimously, adds to the pressure on Bush for a major policy shift. It comes only a month after the midterm elections, which were widely considered a referendum on the Iraq war and which gave the Democrats control of Congress. Panel members said the report offered Bush and congressional Democrats a chance to adopt a bipartisan approach that would win public support.

The Senate voted Wednesday to confirm Robert M. Gates as Bush’s next defense secretary, 95-2. Gates told Congress on Tuesday that the United States wasn’t winning in Iraq.

The report critiques the turmoil in Iraq and the strain on U.S. military forces there in bleak terms.

“Current U.S. policy is not working,” it said, dismissing the option of “staying the course.”

It said U.S. troops are performing admirably, but U.S. military units are under “significant strain.” The nearly four-year war has left few troops to deal with other global crises, it said, and the focus on Iraq has directed resources from the war in Afghanistan.

Reviewing a failed U.S.-Iraqi operation to pacify Baghdad this fall, it stated: “U.S. forces seem to be caught in a mission that has no foreseeable end.”

Meanwhile, it said, Iraq’s leaders have failed to move beyond narrow sectarian interests to try to reach national political reconciliation: “To put it simply: There are many armed groups in Iraq and very little will to lay down arms.”

Nowhere does the report mention Bush’s original goal of a democratic Iraq that would serve as a beacon for the Middle East.

Instead, it warns of severe consequences if Iraq’s deterioration continues and its frail government collapses: “Neighboring countries could intervene. Sunni-Shia clashes could spread. Al-Qaida could win a propaganda victory and expand its base of operations. The global standing of the United States could be diminished. Americans could become more polarized.”

The report also has largely negative assessments of the state of Iraqi security forces, the $34 billion U.S. reconstruction effort and Iraq’s economy. Al-Qaida, it said, has gained a major foothold in Iraq.

Edward Djerejian, a top Baker aide who helped draft the report, said its somber tone reflected panel members’ increasing understanding of the dire state of the U.S. venture in Iraq, which was hardened by a visit to Baghdad. “The more we looked at it, the more we were sobered by the realities in Iraq,” he said.

The panel’s Republicans and Democrats, who were divided over the issue of withdrawing U.S. troops, ended up rejecting both an immediate troop withdrawal and a major surge in U.S. combat forces in Iraq.

They called instead for the U.S. military mission in Iraq to shift from combat operations to training and advising Iraqi forces. The number of American military personnel embedded in Iraqi units would increase significantly, from 3,000 to 4,000 now to between 10,000 and 20,000.

Former Defense Secretary William Perry, a member of the group, said the increase “can be done, I believe, with the existing combat brigade troops” and wouldn’t mean an overall increase beyond the 140,000 U.S. military personnel in Iraq.

By the first quarter of 2008, all U.S. combat brigades other than those required to protect U.S. facilities and conduct special missions “could be out of Iraq,” the report said.

Democrats said the report gave political momentum to their argument that the United States must prepare to withdraw from Iraq, something Bush rejected as recently as last week when he met with Iraqi Prime Minister Nouri al-Maliki.

The report “moved the debate,” said Sen. Joseph Biden, D-Del., incoming chairman of the Senate Foreign Relations Committee. He called it “a major, major departure of the failed policy of the last four years and particularly the president continuing to talk, in essence, about staying the course.”

Some Republicans were more cautious, particularly about the proposal for the United States to open negotiations with Iran, which is believed to be developing nuclear weapons.

“My biggest fear about engaging Iran is that . . . we will remove our focus from trying to prevent them from acquiring a nuclear weapon. Worse than a failed state in Iraq would be a nuclear Iran,” said Sen. Lindsey Graham, R-S.C.

Iran, which is now the principal power broker in Iraq and backs Shiite Muslim politicians and militias, has shown little willingness to cooperate in stabilizing the country.

Baker, who met with Iranian diplomats, acknowledged that “we didn’t get the feeling that Iran is chomping at the bit to come to the table with us to talk about Iraq.” Still, he said, “we ought to put it to them.”

Bush has shown little appetite for the type of diplomatic engagement that, according to officials close to the panel, Baker was determined to recommend in the report.

Bush and Secretary of State Condoleezza Rice have refused direct talks with Iran and Syria, while holding out the possibility of including them in an international conference on Iraq.

From the start of his presidency, Bush rejected the long-held notion that the Arab-Israeli conflict is at the heart of the Middle East’s turmoil. The study group, by contrast, reported that the United States won’t be able to achieve its goals in the region unless it deals directly with that conflict.

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