GPS: "America is holding the live grenade in its hand -- of Iraq -- and the pin is still pulled."

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Fareed Zakaria hosts a panel consisting of Michael (in New York), Former US Ambassador to Israel Martin Indyk (in Washington), and Iraqi Deputy Prime Minister Barham Salih (in Sulaymaniyah, Iraq). They discuss the provincial elections and the way forward.

FAREED ZAKARIA: Let's get started with our Iraq discussion.

Joining me from Sulaimaniyah, Iraq, is the deputy prime minister of Iraq, Barham Salih. In Atlanta, Martin Indyk, the director of the Saban Center at the Brookings Institution, former assistant secretary of state for Near Eastern affairs, and the author of "Innocent Abroad," a wonderful book chronicling his adventures in Middle East diplomacy.

And here in New York, our own Baghdad correspondent, Michael Ware, who has traveled the globe, but spent many, many years in Iraq.


ZAKARIA: Welcome.

Barham, Mr. Deputy Prime Minister, let me ask you first, what is the significance of these elections? These are provincial elections. These are not the national parliamentary elections. How important are these?

BARHAM SALIH, IRAQI DEPUTY PRIME MINISTER: This is monumental. People should not lose sight of what has taken place here. This is messy, confusing sometimes, but it is politics.

People are moving away from the bullet to the ballot box. And I think this a good day for the type of hopes that we have for Iraq, still fraught with challenges and difficulties, but it can be done. The distance that we have traveled is amazing and inspiring...

ZAKARIA: I agree. I agree.

SALIH: And it is a testament to the resilience of the people of Iraq, and also a testament to the commitment of the United States to this process.

ZAKARIA: Michael Ware, you were pretty pessimistic about how things would work out in Iraq. Do you feel like you're seeing some glimmers of hope? Are you more optimistic now?

WARE: Yes, I am, although I am still very much holding my breath, obviously, because I can see the grand dynamics still at play. And despite whatever political progress or talk of reconciliation that there's been, really, these fundamentals have not been resolved -- far from it -- as the deputy prime minister points out. So, I'm still waiting to see how it plays.

And in terms of U.S. interests, America is holding the live grenade in its hand -- of Iraq -- and the pin is still pulled. That pin has not been put back in.

America can not yet release its grip, so to speak, because there's so many flashpoints that still persist, and they're tremendously serious. And the 800-pound gorilla in this room, for example, is -- beyond Sunni-Shia reconciliation, beyond Iran, beyond militias coming into the political process -- there's the Arab-Kurd divide.

These huge issues have not been resolved, so this is no time to be walking away.

ZAKARIA: Martin Indyk, let me ask you. Do you think that people around the Arab World are looking at the Iraqi elections and now saying, you know what? The Sunnis are getting a fair shake, they are not being persecuted by the majority, which is a kind of Kurdish-Shia clique.

MARTIN INDYK, DIRECTOR, SABAN CENTER FOR MIDDLE EAST POLICY, BROOKINGS INSTITUTION: I think there is still a good deal of skepticism about the Iraqi experiment. And the Arab world generally sees it through the lens of the incredible destruction and violence that has taken place and the sectarian warfare that has opened up a divide, a Sunni-Shia divide, across the region.

And so, yes, there will be those small liberal voices in the Arab world who will take heart at the way in which the election process appears to be helping reconciliation between Sunnis and Shias. But I think the general response, for the time being, is that they'll suspend judgment, at best, rather than decide to embrace this approach.

ZAKARIA: Barham, the one Arab country that vociferously denounced Israel was of course the Iraqi government. The prime minister made some very strong statements about Israel. Ayatollah Sistani, the leader of the Shia marja made -- issued a fatwa, actually, denouncing Israel.

Presumably, the prime minister is, of course, sensitive to the views of the majority of Iraqis, and particularly the majority of Sunnis and Shias.

Should we expect a democratic Iraq to be more radical and pro-Palestinian on the Israeli-Palestinian issue, because it will reflect the views of its people?

SALIH: Iraq is a member of the Arab League, and is committed to the Arab peace plan. And we are no longer a rejectionist state the way Saddam Hussein was.

To us the priority is Iraq and Iraq's recovery. We want to be supportive of the Palestinian plight, and we support the legitimate Palestinian leadership.

But certainly, there was a lot of sympathy with the plight of the Palestinian civilians, who have suffered as a result of this episode of conflict.

ZAKARIA: Rejectionist, of course, refers to the rejection of Israel's existence.

The way I decode that very elegant answer, Michael, is that the deputy prime minister of Iraq is saying, our priorities are Iraq.

And this may be the promise of democracy, that there is less blaming external enemies, external foes and a much greater interest in your own country. People are going to vote for these parties in Iraq not on their romantic stands on the Palestinian issue, but on whether or not they can actually clean up Basra, Mosul, et cetera.

WARE: Absolutely. I don't think there would be any Iraqis who are casting their ballots according to a politician's stand on Palestine.

And let's not forget here, the U.S. -- the previous U.S. administration, grossly underrated from the beginning the sense of Iraqi nationalism. Indeed, that's what fueled a lot of the Sunni insurgency. That's what we've seen help propel Muqtada al Sadr to his position of prominence.

So, you cannot underrate Iraqi self-identity as it exists, and Iraqi pride in their nation, and their willingness to defend that as they see it.

ZAKARIA: Martin Indyk, what happens to the American drawdown? Does this good news mean that the United States can proceed with the Obama plan, which some might of course call the Obama-Maliki plan, since the prime minister seems to essentially endorse the timetable that Barack Obama has put forward?

INDYK: I do think that, while the situation is still fragile, and it will still be important for American forces to kind of hold the ring as this political reconciliation process goes ahead -- particularly to national elections that will take place next year -- nevertheless, it is good news in terms of the need, as well as the desire, to draw down the forces pretty much on the timetable as Prime Minister Maliki had agreed on with President Bush.

And that is good news more broadly, because the situation in Afghanistan is deteriorating. The president has made clear that he wants to send more forces there.

We don't have the capabilities to do that unless we can draw down effectively in Iraq. But the last thing he wants to do is draw down there and have the whole situation erupt again.

And so, therefore, I think, with so many other things going wrong, particularly in the Middle East, Barack Obama must be relieved today that the political process is moving forward in a positive way. And that will advantage the effort to draw down the troops and free them up for uses elsewhere.

ZAKARIA: Barham Salih, this is the big question that Americans will be wanting to hear from you. If we draw down, do you promise to keep the peace?

SALIH: Well, I can tell you the progress is undeniable, is tangible, and should be recognized and should be celebrated. However, it is still fragile, and it's still precarious. Without active American engagement and support, the security gains and the political gains could unravel.

There are key issues of power sharing, oil and revenue sharing, disputed territories in Kirkuk and other areas. Some of these fundamental issues are yet to be resolved.

ZAKARIA: How do you do this? You say the support of the international community. What is it that it would take?

Because you're right. There still is not a political deal on the core issues of -- whether it's oil, the sharing of power, exactly how much will be held in the center and how much will be held at the state level.

And many of us worry that that means that when the Americans leave, you guys are going to start fighting about these things and fighting about them using actual weapons.

SALIH: At the end of the day, politics is breaking out in Iraq.

Yes, this is not your Western democracy yet. But what has happened is also a very profound statement that this political process is working. People are taking part in it. ISCI, Dawa, Kurds, Arabs, Shias and Sunnis all are playing within the rules.

WARE: Who really has renounced violence in Iraq? I mean, the underlying fundamental building blocks of the Iraqi political process, unfortunately, still remains how many men-at-arms you command.

There is no key faction within the government that does not have its own militia or paramilitary force. That's just the nature of the beast right now.

ZAKARIA: Wait. Isn't it true that the prime minister's party actually is the one party that didn't have a militia, and..

WARE: This is -- this is where we come. And this is why we see lately the prime minister has been copping flak, because it's been argued that, by default, he's been attempting to pull together some kind of political alliances that effectively give him a militia base.

As the deputy prime minister would know, for some time over the last year, there's been lots of tension out there with threats from the Awakening Councils and the tribes to rise up and essentially overthrow the Iraqi Islamic Party.

So has violence completely left the Iraqi political process? We hope so. But that's still what potentially underwrites the entire system.

SALIH: I want to dissent from what Michael Ware was saying.

I am not saying that Iraq is a perfect democracy and that we -- everybody is living by the rule of law. Yes, there are still militias, people under arms. But there is a significant departure from the days when we had militias rule this country.

Two years ago or so, people were willing to concede defeat in Anbar to al Qaeda. Al Qaeda was ruling in Anbar. Now, Anbar is under the government control.

The militias that helped push out al Qaeda are taking part in the electoral process. That is success. That must be seen for what it is. This is a major, major victory for the political process in Iraq.

ZAKARIA: I agree. It is many problems. But there is no question, good news from Iraq, a good week for Iraq.

And we will be right back.

Deputy Prime Minister, thank you so much. Martin Indyk, Michael Ware, thank you.

And we will be back.