WASHINGTON (AP) – President Bush’s policy in Iraq “is not working,” a high-level commission said Wednesday in a blunt, bleak assessment that urged an immediate diplomatic attempt to stabilize the country and allow withdrawal of most combat troops by early 2008.

After nearly four years of war and the deaths of more than 2,900 American troops, the situation is “grave and deteriorating” and the United States’ ability “to influence events within Iraq is diminishing,” the commission warned.

It recommended America reduce “political, military or economic support” for Iraq if the government in Baghdad cannot make substantial progress toward providing for its own security.

The report said Mr. Bush should put aside misgivings and engage Syria, Iran and the leaders of insurgent forces in negotiations on Iraq’s future, to begin by year’s end. It urged him to revive efforts at a broader Middle East peace. Barring a significant change, it warned of a “slide toward chaos.”

On the highly emotional issue of troop withdrawals, the commission warned against either a precipitous pullback or an open-ended commitment to a large deployment.

“Military priorities must change,” the report said, toward a goal of training, equipping and advising Iraqi forces. “We should seek to complete the training and equipping mission by the end of the first quarter of 2008.”

The commission recommended the number of American troops embedded to train Iraqis should increase dramatically, from 3,000-4,000 currently to 10,000-20,000. Commission member William Perry, defense secretary in the Clinton administration, said those could be drawn from combat brigades already in Iraq.

Then, by early 2008, combat troops could begin to leave the country.

The report intensifies pressure on Mr. Bush to change direction, but he is under no obligation to follow its recommendations. Still to come are options being developed in separate studies by the Pentagon, the State Department and the National Security Council. The White House says he will make decisions within weeks.

“If the president is serious about the need for change in Iraq, he will find Democrats ready to work with him in a bipartisan fashion to find a way to end the war as quickly as possible,” said Rep. Nancy Pelosi, the California Democrat who is in line to become speaker when the new Congress convenes in January.

Mr. Bush received the report in an early morning meeting at the White House with commission members. He pledged to treat each proposal seriously and act in a “timely fashion.”

He was flanked by the panel’s co-chairmen, former Secretary of State James A. Baker III, and former Rep. Lee Hamilton in a remarkable scene – a president praising the work of a group that had just concluded his policy had led to chaos.

“Many Americans are understandably dissatisfied,” Mr. Hamilton said later at a news conference that marked the formal release of the results of the commission’s eight-month labors.

“There is no magic bullet,” said Mr. Baker.

The report painted a grim picture of Iraq nearly four years after American forces toppled Saddam Hussein. It urged Mr. Bush to embrace steps he has thus far rejected, including involving Syria and Iran in negotiations over Iraq’s future.

It warned that if the situation continues to deteriorate, there is a risk of a “slide toward chaos (that) could trigger the collapse of Iraq’s government and a humanitarian catastrophe.”

“Neighboring countries could intervene. … The global standing of the United States could be diminished. Americans could become more polarized,” commissioners said.

With diplomacy under way, the report said, America should increase the number of combat and other troops that are embedded with and supporting Iraqi Army units.

“As these actions proceed, U.S. combat forces could begin to move out of Iraq,” it said. “By the first quarter of 2008, subject to unexpected developments in the security situation on the ground, all combat brigades not necessary for force protection could be out of Iraq.”

More broadly, the commission recommended a renewed push to resolve the Arab-Israeli conflict, saying America cannot otherwise achieve its goals in the Middle East.

Mr. Baker, Mr. Hamilton and the other members of the commission traveled to the Capitol from the White House to present their findings to senior lawmakers. The report makes 79 separate recommendations on Iraq policy.

The recommendations came at a pivotal time, with Mr. Bush under domestic pressure to change course and with the new, Democratic-controlled Congress certain to cast a skeptical look at administration policy.

Additionally, Defense Secretary Rumsfeld, the architect of the administration’s war policy, has resigned. His replacement, Robert Gates, is on track for Senate confirmation this week after a remarkable assessment of his own – that America is not winning the war.

Mr. Bush has rejected establishing timetables for withdrawing the 140,000 American troops and has said he isn’t looking for “some kind of graceful exit out of Iraq.”

There was no letup Wednesday in the killing in Iraq, where a mortar attack killed at least eight people and wounded dozens in a secondhand goods market. Police said the shelling was followed closely by a suicide bombing in the Sadr City Shiite district of the capital.

It was the type of violence that has led many to declare that Iraq is in the throes of a civil war – an assessment that Mr. Bush has refused to accept.

By whatever name, Mr. Baker, Mr. Hamilton and the other eight members of the commission said the status quo was unacceptable.

“Violence is increasing in scope and lethality. It is fed by a Sunni Arab insurgency, Shiite militias, death squads, al-Qaida and widespread criminality. Sectarian conflict is the principal challenge to stability,” the report said.

Mr. Bush said the report “gives a very tough assessment of the situation in Iraq. It is a report that brings some really very interesting proposals, and we will take every proposal seriously and we will act in a timely fashion.”

He also urged members of Congress to give serious consideration to the recommendations.

“While they won’t agree with every proposal, and we probably won’t agree with every proposal, it nevertheless is an opportunity to come together and to work together on this important issue,” he said.

The commission’s recommendation to have American forces embedded with Iraqi units reflects an approach the military already has been emphasizing in recent months. But administration officials say Iraqis are not yet ready to go it alone against the insurgency.

U.S. allies in the region, including the powerful Sunni leadership in Saudi Arabia, say the Arab-Israeli conflict underlies other Mideast problems and that rancor from the impasse makes other issues harder to solve.

The commission recommended that a “diplomatic offensive” be begun by Dec. 31 aimed at building an international consensus for stability in Iraq, and that it include every country in the region.

America accuses Syria and Iran of bankrolling terrorism and stirring up trouble in the region. America has had no diplomatic ties to Iran for nearly three decades, and pulled its ambassador from Syria last year.

Still, the commission said, “Given the ability of Iran and Syria to influence events within Iraq and their interest in avoiding chaos in Iraq, the United States should try to engage them constructively.”

Ahead of the report’s release, the White House said it would consider talking to Iran and Syria if the commission recommended it.

Yet the administration’s overall tone has been one of skepticism about reaching accommodation with Tehran and Damascus. Administration officials have suggested there is more to lose than to gain by rewarding Iran and Syria with high-profile discourse with American diplomats, and warn that Iran in particular could try to use contact with American officials to gain leverage in ongoing separate diplomacy over its nuclear program.

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On the Net:

The Iraq Study Group report is available at:

http://wid.ap.org/documents/iraq/2006isg_report.pdf