The problem goes far beyond Fallujah, where U.S. forces must find a way to punish the killers without worsening the town's hatred of Americans, report Baghdad Bureau Chief Rod Nordland, Beijing Bureau Chief Melinda Liu and Correspondent Scott Johnson in the April 12 issue of Newsweek (on newsstands Monday, April 5). All of Iraq somehow needs to be put into reasonably good order by July 1, when Iraqis are supposed to begin governing themselves.

One vital step in the transition is to choose a U.S. ambassador to replace Paul Bremer as chief representative of America's interests in Iraq. Newsweek has learned that two candidates are being actively considered: Robert Blackwill, a former ambassador to India who now serves as point man on Iraq for national-security adviser Condoleezza Rice, and United Nations Ambassador John Negroponte.

Proponents of the invasion argue that a democratic Iraq would be a catalyst, spreading reform throughout the Mideast by showing democracy's benefits. But if the attempt fails, it could further destabilize the entire region. Already Iraq has become like Afghanistan in the '80s, a rallying cry for Islamic militants around the world.

Although the number of foreign militants who have actually been captured in Iraq remains relatively small- perhaps 150 from a total of roughly 12,000 detainees-the U.S. military claims that jihadis have swarmed in from 27 countries. "If [government officials] just gave us the chance, thousands would go immediately," says Nasser Abdel Azim, a medical student at Egypt's Banha University. "But they are just cowards. They fear America and want us to do the same."

One security analyst estimates that the opposition is staging about 150 attacks a day, mostly nonfatal and never mentioned in the U.S. military's official count, which averages 27 a day. At least 60 foreign contractors have been killed so far, but many attacks go unreported. Lt. Col. Ken Devan, a U.S. Army military-intelligence specialist in Baghdad, says the insurgents' shift away from military targets is probably inevitable. "They're going after civilian targets, softer targets, because they know if they attack us they're going to die."

Some foreign militants -- and an unnerving number of Iraqis -- seem willing to die for the insurgency. Since the war began, at least 48 suicide bombers have killed more than 700 people. At first Iraqis insisted that the bombers came from outside the country, says Brig. Gen. Mark Hertling, deputy commander of the First Armored Division.

"Saddam had distributed more than 200 explosive jackets to his followers before liberation, and he asked them to blow themselves up when they met foreigners," says Ibrahim al-Janabi, who was one of Saddam's spymasters in the 1980s until the dictator caught him plotting a coup.

"But very few Baathists did what he ordered. After he fell, they began giving money to foreigners-peanuts, really-to become suicide bombers." Lately things have changed, Hertling says: "Even Iraqis are now admitting that it's Iraqi suicide bombers, too."

Still, no one seems sure who the insurgents are. But they seem to be drawing recruits from many corners of Iraqi society. A few months ago Iraq's Sunni minority spawned a new jihadist group: Jaish Ansar al-Sunna, allied with the renegade Kurds of Ansar al-Islam. Now Bush aides are worried by the increasingly combative stance of young Shiite radicals like Moqtada al-Sadr, who controls a loosely organized militia of perhaps 10,000 members.

He published his own newspaper until last week, when the CPA shut it down for inciting violence. Now many U.S. officials are urging his immediate arrest before he causes more trouble. "Something will have to be done about him," says a source involved in the talks. "But we have three months."

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