Like the invasion or hate it, that is the good news. The bad news is that a golden opportunity now offered to Britain and America to withdraw from Iraq and restore Iraqi dignity and sovereignty seems certain to be missed.

This past week I found Baghdad’s Green Zone fortress still echoing to the age-old cry of military occupation, that “they still can’t do without us”. Since my last visit this enclave has become a Vatican-like state within a state. Every expedition against insurgents is more counter-productive. Everyone working for the regime risks a brutal death. The Great Mistake staggers on through bloodshed without exit and expense without end.

Visitors to Iraq these days no longer argue the rights and wrongs of the invasion. It is history. The 2003-4 regime of Paul Bremer is like Mao’s cultural revolution: even its participants are allowed to damn its errors. What few can accept is that these errors — Donald Rumsfeld’s errors — were not tangential but fundamental. They wrecked the cause of the occupation for good and all.

If there was an outside chance of the invasion creating a stable and prosperous democracy in Iraq, Rumsfeld’s every decision ensured that this would not be. By removing all law and order — so-called “stuff happens” — Rumsfeld not only wiped out almost every government institution but also domestic consent for central authority. Last week five ministers and 23 of the most senior defence officials were prosecuted for corruption over $1 billion of missing equipment. Nobody was the least surprised.

I would thus regard Khalilzad’s constitution as a masterpiece of making the best of a bad job. It accepts and meets head-on the division between Iraq’s three communities. It gives the Kurds the political autonomy without which they would have declared independence. It gives the Shi’ites in the south the religious autonomy on which, as the majority, they insist. It leans over backwards to give the Sunnis both oil money and some constitutional leverage free of Shi ’ite domination.

This constitution must be the most devolutionist anywhere. It is the American Confederacy rather than the Union. References to human rights are emphatic, but balanced with those to the primacy of Islam. More important, the federalism conceded to keep the Kurds on board has been extended to every region. The whole of chapter five is a hymn to decentralisation.

Under article 114, Iraq’s 18 provinces or any grouping of them can vote to become a region. This gives them not just a prime minister and a cabinet but also full legal, executive and judicial powers over all matters of internal administration and law-making. In any matter not exclusively federal “priority will be given to the region’s law”.

There is no doubt of the intention: human and civil rights may be expressed differently in secular Kurdistan from sharia Basra. How far the constitution can curb the Shi’ite mullahs may well be beyond the power of any central government court.

Khalilzad also produced an ingenious formula to crack the oil revenue conundrum. Article 110 rules that revenue from “current fields” be distributed per capita by the federal government across all provinces, including the oil-poor Sunnis. Yet it leaves any new fields to the regions.

Even more extraordinary is article 129. This gives any region power in “establishing and organising internal security forces for the region, such as police, security and regional guards”. All that remains “exclusive” to the new Iraqi federal army is border defence. This was meant to regularise the Kurdish peshmerga units as the army’s northern brigades, and accepts Kurdistan’s claim to deny any deployment of non-Kurdish troops on its territory.

Yet the same territorial integrity has in effect been conceded to possible Shi’ite and Sunni regions. This is vital given the failure of the coalition to bring law and order to Iraq south of the Kurdish border. It implies the acceptance of unofficial militias into the police and army brigades, many of which they have already penetrated. It makes de facto into de jure.

This is pragmatic. It offers hope of ending the war of the militias, such as between the Badr and al-Sadr factions in the south. It could be a means of engaging Iraq’s local power brokers, through locally recruited security forces, in the fight against a terrorism that is debilitating and demoralising Iraq at present.

The American policy of helicoptering half-hearted Iraqi battalions from distant provinces to “crush the insurgents”, usually for a week or two, is counter-productive. Iraq needs the old British way: seek out the most powerful local sheikh and give him more guns.

This is full of irony. In the British sector order may yet come from the regional transfer of security to the pro-Iranian Badr brigades, the militia wing of the dominant Shi’ite political group. It could render southern Iraq George Bush’s personal fundamentalist Islamic republic, created by an American-authored constitution. Such is democracy.

Much of the constitution remains obscure and contradictory and will be for the new government, elected on December 15, to implement. But a plausible framework is in place that balances Iraq’s national identity with its regional diversity.

That framework must bed down. The question facing the occupying powers is whether their presence helps or hinders this process. The question embraces supporters and opponents of the original invasion.

I have no doubt that nothing will undermine the constitution and the subsequent government so much as its continued puppet status. It cannot plead its sovereignty when its leaders must clatter from one fortress to another in American Black Hawk helicopters, with gun-toting American advisers at their sides and American money in sacks. (Iraq’s banks remain as insecure as its power stations.)

Western officials incant the party line that the Iraqis are “not yet ready” to rule themselves. Ministries are still corrupt. Roads, utilities, police stations, public buildings must be rendered safe. But those saying this are really admitting that such is the screw-up that everyone would rather someone else cleared up the mess later. Baghdad must be the world capital of the politics of denial.

I am less pessimistic. I have more respect for what Iraqis might achieve if freed of the incubus of western minders. The vast majority of Iraqis will respect a withdrawal. They do not forget — nor will Saddam Hussein at his forthcoming trial — that Washington and London supported dictatorship during Saddam’s most genocidal period. They do not forget that the West imposed sanctions that aided Saddam’s rule. They can see that the West invaded their country illegally and brought anarchy.

Of course nervous Iraqi ministers want western troops to stay, if only to protect them. Such dependency must end before it becomes addictive. The truth is that Iraq’s political culture is exhausted by an occupation that feeds insurgency and subjects Iraqis to a daily trauma of death and destruction.

American and British troops had no right to be in Iraq but they have removed Saddam and authored a new constitution. The only reason for their staying is to maintain security, and that they patently cannot do. The claim that early departure “will make civil war inevitable” is as implausible as it is patronising. Staying is what sets civilians at war with each other.

There is much for Britain still to offer Iraq informally. On this visit I saw the army doing valiant work training soldiers and police. Bomb damage must be repaired and schools and colleges helped back to life. It is such assistance — not tanks, guns and fortresses — that is most likely to keep Iraq from sliding into the grip of the mullahs.

The answer is clear. Britain has done its bit. It should leave Iraq to fashion its own fate in its own way. The best moment is when a new Iraqi government takes office in the new year. Then it must stand on its own feet. The British Army could withdraw with its reputation in credit and its honour intact.

Such an ultimatum may mean Tony Blair upsetting Bush. If so, too bad. It is surely time for this poodle to bark.