The deadly attack Thursday on the well-guarded Green Zone here may mark the launch of a new insurgent offensive during the holy month of Ramadan, which began Thursday night.
Two explosions in the central Baghdad zone - the seat of Iraq's interim government and US and British Embassies - left five dead.
But despite continued insecurity, the steady US military pressure against insurgents, coupled with efforts of the Iraqi interim government to negotiate, may be gaining at least some degree of traction.
Among the signs of progress in the conflict:
• Fighters loyal to Shiite cleric Moqtada al-Sadr this week turned over many heavy weapons for cash as part of an agreement to stop fighting, and bring more aid and government control to impoverished Shiite neighborhoods of Baghdad.
• Rocky negotiations had continued in the insurgent stronghold of Fallujah, west of Baghdad, spurred by almost nightly US air raids.
But interim Prime Minister Iyad Allawi issued a threat Wednesday of a "major offensive" if the city does not hand over Abu Musab al-Zarqawi, the militant leader whose Towhid and Jihad group claims numerous atrocities. The move caused the suspension Thursday of negotiations.
This saber-rattling comes amid reports that weeks of steady US airstrikes are causing a rift between the Iraqi resistance and Mr. Zarqawi's extremist foreign fighters in Fallujah.
Grand Ayatollah Ali Sistani, the most revered cleric among Iraq's majority Shiite Muslims, called Wednesday for all Shiites to register to vote in elections slated for next January - a qualified endorsement for an event that many analysts say will be crucial to calming Iraq.
"There are some positive signs now, but whether this turns into a good future for Iraq ... depends on the election, and whether broad sectors of society feel represented," says Juan Cole, an Iraq expert at the University of Michigan.
"The problem is that as long as the guerrillas exist, as long as people [in Fallujah] aren't turning them in, the most you can hope for is a temporary cease-fire," he says. Violence "can always start back up very easily."
Analysts say attitudes became more cooperative after Oct. 1, when US and Iraqi forces moved into the insurgent- controlled city of Samarra, then started cutting militant "rat lines" into Baghdad and stepping up ground operations in Ramadi.
Iraqi and US officials say they have begun a series of offensives across the Sunni Triangle aimed at rooting out insurgents before the vote. At least eight Iraqis were reported killed during clashes in Ramadi Thursday. Fallujah has been softened with airpower and talks.
Yet few are using the word "optimism." Rumors spread Thursday in Baghdad of a new Ramadan offensive, using car bombs and targeting foreigners. Last year, the holy month witnessed a surge of attacks. And each strand of progress is beset with potential pitfalls - from Sadr City, where $400,000 was spent in the first two days of the weapons buyback, to Fallujah.
"In Sadr City, I would not underestimate the power of the greenback," says a Western diplomat. A $500 million aid package is part of the bargain. "But there's going to come a time when someone will say: 'You did not do what you said you'd do.'"
"Resorting to force alone is not a solution, and Allawi, as well as some Americans, is heeding this argument," says Ghassan Atiyyah, head of the Iraq Foundation for Development and Democracy. "The problem with [cleric] Sadr is different from Fallujah. It is a revolt of the downtrodden and poor."
Cash for arms "will not be enough," he says. "But if [authorities] put their money where their mouth is, and start projects and give people work, then they could really win them over."
But while the Shiite revolt may be on hold - though US officials say they are unimpressed with the number of weapons handed in - Fallujah simmers along. Talks are so uncertain that Mr. Allawi warned: "If Zarqawi and his group are not handed over to us, we are ready for major operations in Fallujah." That threat came as a surprise to Fallujah negotiator Hatem Maddab, who told Al Jazeera television that he has seen no proof of Zarqawi's presence in the rebel-held city.
"Zarqawi is like the weapons of mass destruction that America invaded Iraq for," said Mr. Maddab. "We hear about that name [Zarqawi], but he is not here. More than 20 or 30 homes have been bombarded because of this Zarqawi ... but only women, children, and the elderly have been affected."
That violence has helped divide the foreign fighters of Zarqawi - who the US says is the Al Qaeda leader in Iraq - and the more typical anti-US resistance.
Fallujah residents "are definitely fed up with it, and think: 'Are we ever going to get a real life back?' " says the diplomat. "They realize - and it's taken them a long time - that these [extremists] are going to be against any government in Iraq, elected or not.
"Allawi is not gung-ho [for a military solution], but this just can't go on forever," he adds. "And it's clear that much of the terrorism emanates from Fallujah."
Indeed, when marines cordoned off the city for several weeks last April, a US military intelligence officer noted at the time, not a single car bomb went off in Baghdad. Marine commanders decided not to invade Fallujah then, concerned about the likely scale of US and civilian deaths.
"With Fallujah, it's not a question of hunger - they want a share of power," says Atiyyah. "Now force is being used, but there is a deep-seated anger. This needs a political solution. Allawi is willing. The question is: How much are the Americans willing to help him?"
Even if a peaceful solution is struck, it is not clear if Fallujans can expel the militants, who are reported to have worn out their welcome in the city, and even been killed in local disputes.
Arab extremists of the Salafi school, the same adhered to by Al Qaeda militants, claim that Iraqis not willing to carry arms are infidels. They "are the crux of our ailment. Most of them are Saudis, Syrians," according to a commander of native insurgents, identified as Abu Barra, who was quoted by The Washington Post. "It is the Zarqawis and his Salafi group who are going to lead Fallujah, Samarra, Baqubah, Mosul, and even some parts of Baghdad to disaster and death."
Some of the issues could have been solved more easily last year if Iraqis had had more say in ruling the country, says Michigan's Cole. National elections were postponed. Municipal elections in Najaf were cancelled.
"The process that's going on now is the kind of compromise that could have been made all along, if the Americans hadn't been such control freaks," says Cole. "[They] talked a good game, with regard to democracy ... but the Americans kept trying to jury-rig things, to make sure their guys got in."