The US should try to pull most combat troops out of Iraq by early 2008, a high-level panel recommended today.
The eagerly-awaited report from the bipartisan Iraq Study Group called for an urgent new diplomatic offensive to stabilise the country, telling the Bush administration it must "engage constructively" with Iran and Syria.
America should reduce political, military or economic support if the government in Baghdad does not make substantial progress in providing for its own security, the 10-member group said.
The commission warned bluntly that the US faced a "grave and deteriorating" situation after nearly four years of war in Iraq which could trigger a humanitarian catastrophe if left unchecked.
The US faced seeing its global standing diminished if it did not act, it added.
"The primary mission of US forces in Iraq should evolve to one of supporting the Iraqi army, which would take over primary responsibility for combat operations," the group wrote.
"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.
"At that time, US combat forces in Iraq could be deployed only in units embedded with Iraqi forces, in rapid-reaction and special operations teams and in training, equipping, advising, force protection and search and rescue."
President George Bush's current policy was "not working" and a purely military approach would not solve the problem, the report's authors said.
They insisted the US should not make an "open-ended commitment" to keep large numbers of troops in Iraq.
There was also a stark warning for the government in Baghdad that if they failed to make progress, US support would be reduced.
"We must help the Iraqis help themselves," co-chair Lee Hamilton said as the panel formally presented its 79 recommendations.
"President Bush and his National Security Team should convey a clear message to Iraqi leaders: the US will support them if they take prompt action to make progress on milestones on national reconciliation, security and improving the daily lives of Iraqis."
"If the Iraqi government does not make significant progress towards the achievement of milestones the US then should reduce its political military or economic support for the Iraq."
He added: "The US must encourage Iraqis to take responsibility for their own destiny.
"This responsible transition can allow for the reduction of the US presence in Iraq over time.
"The primary mission for US forces should evolve to one of supporting the Iraqi army, which would take over primary responsibility for combat operations."
Mr Hamilton said it was clear that the Iraqi government would need help from the US for "some time to come".
"Yet the US must make it clear to the Iraqi government that we can carry out our plans, including planned redeployments, even if the Iraqi government did not implement their planned changes," he said.
"The US must not make an open-ended commitment to keep large numbers of troops deployed in Iraq."
Foreign Secretary Margaret Beckett welcomed the US report which she called a "substantial and complex piece of work" and which included input from Prime Minister Tony Blair and senior British officials.
She said: "From those discussions we get the impression that their thinking was broadly in line with our own, but obviously we need to read and digest their recommendations."Reuse content