IN JULY, I made my seventh trip to Iraq. From military bases in Basra, Fallujah and Anbar province to Baghdad's Green Zone, I spent time with our diplomats and our generals, with Iraqi political leaders and with our troops. Even forty-eight hours on the ground, in a protective bubble, makes more vivid all that we have achieved--and all that we still must overcome.

In Iraq, we confront two parallel realities. Our military and civilians are doing extraordinary work, under the most difficult conditions--and they are getting results. For example, the Iraqi army is much more capable than it was just a year ago, thanks to an increasingly effective U.S.-led training effort.

But for all our achievements, the larger reality is this: Iraq--and the success of America's mission there--remains prisoner to terrible and growing sectarian violence. Sectarian violence has trumped the insurgency and foreign terrorists as the main security threat in Iraq. In December 2005, Iraqis voted by the millions, but 90 percent cast their ballots along sectarian lines. Far from a democratic turning point, the elections reflected Iraq's deepening fault-lines. Since then, ethnic militias increasingly have become the law in large parts of Iraq. They have infiltrated the official security forces, especially the police. Meanwhile, Iraqis have less electricity, clean water, sewage treatment and oil than before the war. Iraq's government ministries are barely functional. Iraq looks closer to a failing state than an emerging democracy.

Understandably, the voices calling for an immediate withdrawal of American troops from Iraq are getting louder. Most Americans want to see our military personnel leave Iraq as quickly as possible. But it matters profoundly what we leave behind. A precipitous withdrawal risks trading a dictator for chaos, including a failed state careening towards a civil war that could embroil the rest of the region. Unfortunately, President Bush does not have a strategy for victory in Iraq. His strategy is to prevent defeat. It is not enough to say our plan is to stand down as Iraqis stand up. What we need is a plan to get Iraqis to stand together.

TEN YEARS ago, Bosnia was drowning in ethnic cleansing and facing its demise as a unified state. After much hesitation, the United States stepped in with the Dayton Accords to keep the country whole by, ironically, separating it into ethnic federations. We even allowed Bosnians, Croats and Serbs to retain separate armies. With the help of U.S. troops and others, Bosnians have lived a decade in peace. Now, they are strengthening their common central government, and disbanding their separate armies. To be sure, it has been a fragile peace, but one that looks mighty appealing when compared with the carnage in Iraq.

In Bosnia, we navigated between two extremes: an ultra-realist approach of permanent partition and an idealist approach of immediately forcing people back together who needed some time apart. Instead, a pragmatic and progressive policy maintained Bosnia as a single country but gave each community breathing room and time to reconcile.

The Bush Administration, despite its profound strategic misjudgments, has a similar opportunity in Iraq, but only if it is willing to fundamentally change course. "Staying the course" sounds strong, but it isn't smart when you've been steering by a fundamentally faulty compass. We have to break the cycle of mistake accumulating upon mistake, acknowledging uncomfortable facts on the ground and adjusting our strategy accordingly.

Together with Les Gelb, president emeritus of the Council on Foreign Relations, I proposed such a change of course with a five-point plan premised on the notion that a political settlement must be found that gives all three major communities in Iraq--Kurds, Shi'a and Sunnis--a stake in the future in Iraq, incentives to pursue their interests peacefully and space for a cooling off period--similar to the one in Bosnia.

THE FIRST element of this plan is to establish three largely autonomous regions with a strong--but limited--central government in Baghdad. This central government would be responsible for common interests like border defense, foreign policy, oil production and revenues. The regional governments--Kurd, Sunni and Shi'a--would be responsible for managing their own affairs, from education to family law to economic policy.

The United States need not impose this solution. Iraq already has a federalist structure. The new constitution provides for Iraq's 18 provinces to join together in like-minded regions. In the Iraqi constitution, not unlike our own Articles of Confederation, local law trumps the national.

Some will ask whether this plan will lead to sectarian cleansing. The answer is that it's already happening. Dozens of dead bodies turn up daily in Baghdad. Since the al-Askariya mosque bombing in Samarra in February 2006, some 200,000 Iraqis have fled their homes for fear of sectarian reprisal. All told, more than 1.3 million Iraqis are internally displaced, and two million more have left the country since 2003, many of them the very middle-class professionals Iraq needs to build a functioning state and society.

The Bush Administration's inability to establish security in Iraq's cities has been particularly damaging to our post-reconstruction efforts. In this plan, Baghdad would become a federal zone, while densely populated areas with mixed populations would receive both multi-sectarian and international police protection. The goal--as in Bosnia--is to prevent further sectarian cleansing and to re-establish order.

Let's be clear: a comprehensive political settlement won't end the Sunni insurgency, but it will give the Sunni political leadership a far greater stake in its own affairs. This should serve to marginalize the insurgents and to make the insurgency more manageable. Similarly, while decentralization won't end the militia problem overnight, it is the best way to begin rolling it back. Militias have so heavily infiltrated the security forces that our training program is effectively making them better killers. Prime Minister Maliki's National Reconciliation program recognizes these problems. But without addressing the underlying security vacuum that gave rise to these militias in the first place, the new Iraqi government will be unlikely to succeed in reining them in where the American-led Coalition Provisional Authority has failed.

The Iraqi constitution already provides for regional security forces; the regions can therefore become magnets for the militias, integrating them into local forces. Eventually, as individuals, not, as at present, as sectarian units, they can join a national force.

Increasingly, each community will support federalism, if only as a last resort. The Shi'a know that they can dominate the government, but they can't defeat a Sunni insurrection. The primary demand of the Kurds is to consolidate the autonomy they've built up over the past 15 years, but to also preserve a united Iraq as protection against the Turks. Until recently, the Sunnis sought a strong central government because they believed they would retake power. Now, they are beginning to recognize that they won't and that the greatest danger to their interests is a highly centralized, Shi'a-run state that gives them short shrift on resources and rights, and enforces the law with militia.

But for the Sunnis to fully accept federalism, they must be given assurances that their region would be economically viable. Virtually all of Iraq's exploited oil reserves are in the Kurdish and Shi'a area. So the second part of the plan would guarantee the Sunnis a fair share of Iraq's present and future oil reserves, proportionate to their size of Iraq's population. The central government would set national oil policy and distribute the revenues, which would reinforce each community's interest in keeping Iraq intact. International supervision would ensure transparency. Iraq's oil wealth would be the glue that keeps the country together.

Such an arrangement requires amending the constitution, a process the U.S. ambassador to Iraq, Zalmay Khalilzad, worked into the constitution just before it was proposed to the Iraqi people in a referendum, in order to secure Sunni political participation. The Shi'a and Kurds should support such an amendment because it would be in their economic self-interest. Petroleum experts agree that the Iraqi oil industry will attract more desperately needed foreign capital if it is run as a unified whole. Shi'a and Kurds will get a slightly smaller piece of a much larger pie. That's a better deal than they would get by going it alone, which will not attract the needed investment. At the same time, guaranteeing Sunnis a piece of this pie will reduce the incentive of insurgents to attack the oil infrastructure. That would be good news for everyone.

The third element of the plan is to rejuvenate the American reconstruction program. The incompetence of the Bush Administration's reconstruction program makes more reconstruction money and a jobs program a hard sell. But both are necessary. The large number of angry young men without jobs is feeding the Shi'a militia, the Sunni insurgency and criminal gangs.

A new aid effort would have to be radically different than the old one. For example, instead of international mega-firms pocketing valuable contracts, spending a huge chunk of each one on security, and then falling short, Iraqis should be in the lead of small-scale projects that deliver quick results and generate local jobs.