As the Bush administration was entering office in 2000, Donald Rumsfeld exuberantly expressed its grandiose ambitions for Middle East domination, telling a National Security Council meeting: “Imagine what the region would look like without Saddam and with a regime that’s aligned with US interests. It would change everything in the region and beyond.”

A few weeks later, Bush speechwriter David Frum offered an even more exuberant version of the same vision to the New York Times Magazine: “An American-led overthrow of Saddam Hussein, and the replacement of the radical Baathist dictatorship with a new government more closely aligned with the United States, would put America more wholly in charge of the region than any power since the Ottomans, or maybe even the Romans.”

From the moment on 1 May 2003, when the President declared “major combat operations ended” on the deck of the USS Abraham Lincoln, such exuberant administration statements have repeatedly been deflated by events on the ground. Left unsaid through all the twists and turns in Iraq has been this: Whatever their disappointments, administration officials never actually gave up on their grandiose ambitions. Through thick and thin, Washington has sought to install a regime “aligned with US interests” - a government ready to cooperate in establishing the United States as the predominant power in the Middle East.

Recently, with significantly lower levels of violence in Iraq extending into a second year, Washington insiders have begun crediting themselves with - finally - a winning strategy (a claim neatly punctured by Juan Cole, among other Middle East experts). In this context, actual Bush policy aims have, once again, emerged more clearly, but so has the administration’s striking and continual failure to implement them - thanks to the Iraqis.

In the past few weeks, the Iraqi government of Prime Minister Nouri al-Maliki has made it all too clear that, in the long run, it has little inclination to remain “aligned with US interests” in the region. In fact, we may be witnessing a classic “tipping point,” a moment when Washington’s efforts to dominate the Middle East are definitively deep-sixed.

The client state that the Bush administration has spent so many years and hundreds of billions of dollars creating, nurturing, and defending, has shown increasing disloyalty and lack of gratitude, as well as an ever stronger urge to go its own way. Under the pressure of Iraqi politics, Maliki has moved strongly in the direction of a nationalist position on two key issues: the continuing American occupation of the country and the future of Iraqi oil. In the process, he has sought to distance his government from the Bush administration and to establish congenial relationships, if not an outright alliance, with Washington’s international adversaries, including the Bush administration’s mortal enemy, Iran.

Withdrawal becomes an official issue

Perhaps the most dramatic symbol of this new independence is the Iraqi government’s resistance to a Washington proposal for a “status of forces agreement” (SOFA) that would allow for a permanent and uninhibited US military presence in Iraq.

With the impending expiration of the UN resolutions that gave legal cover to the US military presence in Iraq, the SOFA negotiations are crucial. They began with a proposal that expressed the full extent of Washington’s ambitions to utilize Iraq as the base for making the US “more wholly in charge of the region than any power since the Ottomans, or maybe even the Romans.”

The proposal first leaked to the press in June 2008 was essentially a major land grab, including provisions like the following that would not have seemed out of place in a nineteenth century colonial treaty:

r     An indefinite number of US troops would remain in Iraq indefinitely, stationed on up to 58 bases in locations determined by the United States.

r     These troops would be allowed to mount attacks on any target inside Iraq without the permission of, or even notification to, Iraqi authorities.

r     US military and civilian authorities would be free to use Iraqi territory to mount attacks against any of Iraq’s neighbours without permission from the Iraqi government.

r     The US would control Iraqi airspace up to 30,000 feet, freeing the US Air Force to strike as it wishes inside Iraq and creating the basis for the use of, or passage through, Iraq’s air space for planes bent on attacking other countries.

r     The US military and its private contractors would be immune from Iraqi law, even for actions unrelated to their military duties.

r     Iraq’s defense, interior, and national security ministries (and all of Iraq’s arms purchases) would be under US supervision for 10 years.

When leaked (clearly by Iraqis involved in the negotiations), this proposal generated opposition across the political spectrum from parliament to the streets. It was even denounced by the usually silent Grand Ayatollah Ali al-Sistani, the most influential Shia Ayatollah. Soon, Prime Minister Maliki made clear his own rejection of the proposal, setting in motion a chaotic negotiating process in which the Iraqis seem to have argued vehemently for a more modest, briefer US presence, as well as a definite deadline for full withdrawal - a proposal that was anathema to the Bush administration.

By early August, when the details of a new proposal endorsed by Secretary of State Condoleezza Rice began to leak out, it was clear that US negotiators had given way, granting significant concessions to the Iraqi side. According to Iraqi insiders, the new draft agreement called for US troops to be completely withdrawn from Iraqi cities, where most of the fighting usually takes place, by the summer of 2009. All US troops - not just the “combat” troops usually mentioned when Democrats talk about withdrawal timelines in Iraq - would have to be gone by the end of 2011.

If the leaked draft were implemented, the US would leave behind those 58 bases, including the five massive “enduring” bases into which the Bush administration has poured billions of dollars. Moreover, the unhindered scope of action Washington had originally demanded for its forces would be dramatically limited: The US would not have the right to attack other countries from Iraqi soil, its ability to conduct operations within Iraq would be circumscribed, and immunity from prosecution would be restricted to US military personnel (and then only when they were participating in approved military actions).

Symptomatic of the loosening US grip on its Iraqi client government were the reactions of the two sides to the leaked provisions of the new version of the agreement. Secretary of State Rice declared it “acceptable” and explained uneasily that the timeline proposed was not the sort of fixed withdrawal date that the Bush administration had long adamantly rejected, but an “aspirational” “time horizon” that would depend on “conditions” in Iraq.

Maliki, in all likelihood responding to the fervour of public protests to Rice’s comments, immediately declared the agreement unacceptable unless the deadline for withdrawal was time-based and unconditional. In a well publicized speech to a gathering of tribal sheiks, he said that any agreement must be based on the principle that “no foreign soldier remains in Iraq after a specific deadline, not an open time frame.” In further clarifying his remarks, a key aide told the Associated Press that “the last American soldiers must leave Iraq by the end of 2011, regardless of conditions at the time.”

The latest reports suggest that a further round of secret negotiations had restored some US demands, including full immunity for American soldiers (but not mercenary fighters), and application of the withdrawal deadline to combat troops only. Such concessions by Maliki, however, appeared certain to trigger another round of protest and resistance in the streets and in the Iraqi Parliament.

Whatever their outcome, the still-unfinished negotiations point to something quite new in the relationship between the two governments. Until recently, the Iraqi leadership faithfully sought to enact whatever policies the Bush administration favoured (though its capacity to implement them was always in question). With the proposed SOFA, this posture disappeared, replaced by a clear antagonism to Washington’s desires. With its formidable weapons (including 146,000 soldiers on the ground), Washington is bound to win at least some of these confrontations, but what we may be seeing is the end of the dream of a regime “closely aligned” with US policies.

Re-emergence of Oil Nationalism

Nothing better highlights this transformation than oil policy. From the beginning of its occupation of Iraq, the Bush administration sought to quadruple Iraqi oil production by delivering control of the industry to the major international oil companies. Once given free rein to act on their own discretion, Washington policymakers believed that the oil majors would invest vast sums in modernizing existing fields, activate undeveloped reserves using the most advanced technology available, and discover major new fields utilizing state-of-the-art exploration and extraction methods.

Up until 2007, the Iraqi government was an active ally in this enterprise, even though the vast majority of Iraqis - including the powerful oil workers union, the religious leadership, and a majority of Parliament - vehemently opposed these plans, demanding instead that control of the industry remain in government hands. In 2004, the US-appointed Iraqi government enthusiastically endorsed an International Monetary Fund agreement that mandated the development of major Iraqi oil reserves by international oil companies.

When those companies found the legal basis for such investment too fragile to risk vast sums of capital, the Iraqi government (surrounded by American advisors) immediately began work on an oil law that would presumably provide a more secure foundation for their investment. In the meantime, informal advice was accepted from the oil majors, whose technicians were placed in charge of various engineering operations within the country.

In 2007, when the oil law was finally delivered to the Iraqi Parliament, it met with unremitting opposition. The always strong oil unions immediately began a ferocious resistance campaign that stalled the law.

None of these developments altered the Bush administration’s determination to push the law through. They did not, however, anticipate that the Maliki administration itself would become a further source of opposition. As Charles Ries told journalists on leaving his position as US Economic Ambassador to Iraq in August 2008 after a year of failure, “When I got here I was quite optimistic it was only a month or two [before the petroleum bill would be passed, but the] more I understood what the real issues were, it was clear this was going to be a major political challenge.”

While Ries was on the job, even the leadership of the Ministry of Oil, until then a pro-American bastion, went into opposition. One symptom of this was its failure to complete five no-bid contracts (that did not include either investment or extraction rights) with oil consortia led by the usual suspects - Exxon Mobil, Royal Dutch Shell, BP, Total, and Chevron - designed to increase Iraqi production by 500,000 barrels per day. Oil Minister Hussein al-Shahrastani told the Wall Street Journal that a key reason for the faltering negotiations was the desire of the oil companies for “preferential treatment for future oil-exploration deals.” This comment, like the faltering negotiations, hinted at the abandonment of the Bush administration’s long-desired version of Iraqi oil policy.

The new attitude was underscored when the Oil Ministry revived a Saddam-era agreement with the China National Petroleum Corporation, which was now granted a $3 billion contract to develop the Ahdab oilfield. Given the growing US-China rivalry over the control of foreign oil sources, the symbolism of this act couldn’t have been clearer - especially since the earlier contract had been unceremoniously cancelled by the United States at the beginning of the occupation in 2003. No less important, this was a “service contract” whose terms did not follow US guidelines calling for the reduction or elimination of Iraqi government control of the oil industry.

Soon after announcing this new agreement, Oil Minister Shahrastani offered what might be seen as a declaration of oil policy independence. “[Global] oil supplies,” he declared, “meet and may slightly exceed current world demand.” The world, that is, had plenty of oil, and so there was, he insisted, no global need to rush pell-mell into oil development agreements that might not, in the long run, be of use to Iraq.

This represented an attack on the fundamental premise of US oil policy - that, as Vice President Cheney told an oil industry gathering back in 1999, “By 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? While many regions of the world offer great oil opportunities, the Middle East, with two-thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies.”

Significantly, back in 2001 - and before 9/11 - the Cheney Energy Task Force, working with the National Security Council, would make this commitment the centerpiece of administration Middle Eastern policy, defining the world situation as one in which the supply of oil must be drastically increased to meet the demand for an “additional fifty million barrels a day.”

Oil-producing countries of the Middle East never embraced Cheney’s analysis and consistently resisted US efforts to encourage, induce, or coerce dramatic increases in oil production. Instead, they viewed the “shortage” of oil as a natural result of market forces, beneficial to their own economies.

With the success of the US invasion, the Iraqi government threatened to become a maverick among the Organization of Petroleum Exporting Countries (OPEC), endorsing US supported plans that, theoretically, would have quadrupled Iraqi production within 10 years. So Shahrastani’s comments were a signal that Iraq was rejoining OPEC’s ranks and potentially opening a new era in post-invasion Iraqi politics in which the government he represented would no longer be a reliable ally of the United States.

Nail in the Coffin of American Defeat?

Implicit in these actions is a new attitude toward, and assessment of, the US presence in Iraq. Prime Minister Maliki and his cohorts appear to have adopted the viewpoint of journalist Nir Rosen that “the Americans are just one more militia,” just the most powerful of the rogue forces that they have to manage and eventually eliminate.

As the Iraqi government accumulates an expanding lake of petrodollars and finds ways to shake them loose from the clutches of US banks and US government administrators, its leaders will have the resources to pursue policies that reflect their own goals. The decline in violence, taken in the US as a sign of American “success,” has actually accelerated this process. It has made the Maliki regime feel ever less dependent for its survival on the American presence, while strengthening internal and regional forces resistant or antagonistic to Washington’s Middle East ambitions.

The respected Iraqi newspaper Azzaman pointed to one of these forces in a recent editorial: “Iran has emerged as the country’s top trading partner. Its firms are present in the Kurdish north and southern Iraq carrying out projects worth billions of dollars. Iranian goods are the most conspicuous merchandise in Iraqi shops. Iraq, though occupied and administered by America, has grown to be so dependent on Iran that some analysts see it as a satellite state of Tehran.”

To support this contention, Azzaman asserted: “The Ministry of Oil and other key portfolios such the Ministry of Interior and Finance are in the hands of pro-Iran Shiite factions.” Citing Oil Ministry sources, it suggested that recent changes in oil policy actually reflected Iranian pressure to “exclude US oil majors from contracts to develop the country’s massive oil fields.”

Azzaman may be overemphasizing Iranian influence, since there are myriad internal Iraqi influences that continue to press against Washington’s desire for a client regime. Parliament, the Sunni and Shia religious leaderships, powerful unions, and the Sunni and Shia insurgencies have all registered broad opposition to continued US presence and influence.

As all this occurs, US leverage over the Iraqi government, though still formidable, is in decline. The Bush administration - or its soon-to-be elected successor - may face a difficult dilemma: whether to accept some version of the withdrawal demands of the Iraqi government or re-escalate the war in yet one more attempt to create a government that is “aligned with US interests.” The recent declaration by the Pentagon that only the most modest of troop reductions is militarily feasible in the foreseeable future may be a symptom of this dilemma. Without a full complement of US troops, after all, it will be increasingly difficult to convince the Maliki regime to re-embrace policies favored by Washington.

The question remains: Can anything reverse the centripetal forces pulling Iraq from Washington’s orbit? Will the President’s “surge” strategy prove to have been the nail in the coffin of its hopes for US dominance in the Middle East?

If this turns out to be the case, then watch out domestically. The inevitable controversy over “who lost Iraq” - an echo of those earlier controversies over “who lost China” and “who lost Vietnam” - is bound to be on the way.

Michael Schwartz, professor of sociology at Stony Brook State University, is the author of the forthcoming: “War Without End: The Iraq Debacle in Context” (Haymarket, 2008). Courtesy TomDispatch.com