The New Rules of Engagement

The secret meeting took place earlier this year on the outskirts of Baghdad, in a safe house known only to the insurgents in attendance. One of them, an Iraqi known by the nom de guerre Abu Marwan, is a senior commander of the leading Baathist guerrilla group called the Army of Mohammed. Together with a representative of an alliance of Iraqi Islamist insurgent groups, Abu Marwan met aides to Abu Mousab al-Zarqawi, the leader of al-Qaeda in Iraq. The purpose was to discuss the idea of uniting under a joint command the disparate networks fighting U.S. forces in Iraq. When the conversation turned to leadership issues, Abu Marwan's companion suggested that al-Qaeda replace al-Zarqawi with an Iraqi, "as it would have an enormous impact on the other groups." But an al-Zarqawi aide rebuffed the notion. "Who started our organization?" he asked rhetorically. No one was prepared to ask al-Zarqawi to step aside.

That episode might seem inconsequential in a long and bloody war that's growing deadlier on the ground--20 service members died last week, including 10 Marines killed by a bombing in Fallujah on Thursday--and increasingly unpopular at home. Yet it reflects a critical new dimension to the war, a shifting tide within al-Qaeda and the broader insurgency. The Jordanian-born al-Zarqawi and his network of hard-line jihadis have long been the driving force of the insurgency, transforming it from a nationalist struggle to one fueled by religious zealotry and infused with foreign recruits. But a TIME investigation, based on dozens of interviews with military and intelligence officials as well as Iraqi leaders inside and outside the insurgency, reveals that Iraqis are reclaiming the upper hand, forcing al-Zarqawi to adjust. Differences between Baathist insurgent groups and al-Qaeda are driven by discomfort with al-Zarqawi's extreme tactics and willingness among some Iraqi commanders to join the political process. U.S. officials in Baghdad confirm to TIME that they have stepped up their efforts to negotiate with nationalist insurgents and the Sunnis they represent. "We want to deal with their legitimate concerns," U.S. Ambassador Zalmay Khalilzad tells TIME. "We will intensify the engagement, interaction and discussion with them."

That doesn't mean the U.S. is any closer to getting out of Iraq. In a speech at the U.S. Naval Academy in Annapolis, Md., last week, President George W. Bush responded to mounting doubts about the war by offering a glowing assessment of the mettle and readiness of fledgling Iraqi troops, which the Administration hopes will steadily assume security duties, beginning with next week's national elections. At the same time, Bush refused to set a timetable for a pullout, pledging to "settle for nothing less than complete victory." Yet if that means staying until the insurgency is defeated by arms, U.S. troops should expect to remain in Iraq for a long time, no matter how well the Iraqis perform. "This insurgency has got roots, it's got money, and it's got motivation," says a U.S. intelligence official, in an assessment echoed by military officers and insurgent leaders alike. "And the life span of this insurgency could be years."