In last Tuesday's suicide bombing attack at a mess tent at Mosul, 22 were killed -- 18 of them Americans -- and 50 wounded.

"We can't afford to keep taking that kind of hit," a Pentagon official said. "We can't afford it in terms of American public opinion, and it causes us to loose credibility with the Iraqi public."

Upcoming January elections will not improve the deteriorating security situation, these sources said, all speaking on condition of anonymity because of the sensitiveness of the topic.

Plus a new threat has arisen.

"We are starting to play the ethnic card in Iraq, just as the Soviets played it in Afghanistan," said former CIA chief of Afghanistan operation Milt Bearden.

"You only play it when you're losing and by playing it, you simply speed up the process of losing," he said.

Phoebe Marr, an analyst who closely follows events in Iraq, told United Press International that "having the U.S. military unleash different historical enemies on each other has become an unspoken U.S. policy."

Bearden, Marr and others also referred to the Pentagon's tactic of pitting one group of enemies against another in Iraq as being fraught with danger.

For example, during the assault on Fallujah, wary of the reliability of Iraqi forces, the Marines used 2,000 Kurdish Peshmerga militia troops against the Arab Sunnis. The two groups share a long history of mistrust and animosity, according to Marr.

Both ethnic groups are Sunni, but Kurds speak a different language, have distinct customs, and are not Arabs.

"I think the U.S. military is trying to get ethnic groups to take on the insurgents, and I don't think it will work," Marr said.

According to a former senior CIA official, the agency is dealing with reports of ethnic cleansing being undertaken by the Kurds in areas near Kirkuk.

"It's all taking place off everyone's radar, and it's very quiet, but it's happening," this source said.

Original reports disclosing that up to 150,000 Arab Sunnis had been uprooted and placed in camps have proved to be unreliable, several U.S. officials said.

"There's so much white noise, so much unreliable rumor in the air," said Middle East expert Tony Cordesman. "You are going to have to get data from people on site, not from those in the rear areas."

According to Marr, Iraq has always been a complicated mosaic of religious and ethnic groups and tribes. The tilt of the Bush administration towards Iraq's Shiites, who compromise 60 percent of the population, upset the balance of power, she said.

Former Defense Intelligence Agency chief of Middle East operations, Pat Lang, said the key blunder was the disbanding of Iraq's 400,000-man army. "At a stroke, we went from a liberator to an occupier."

A Pentagon official said that the Iraqi army had been "a respected institution," in Marr's words, "a focal point of national identity," utterly abolished.

From the beginning, sectarian and ethnic groups have been quietly at war. A U.S. intelligence official told United Press International that soon after the U.S. victory, there were Shiite assassination squads "that were going around settling scores that dated back from the time (Iraqi leader) Saddam Hussein was in power."

There were also suicide bombings of Shiites by Islamist jihadis allegedly led by Abu Musab Zarqawi, an Islamist militant now associated with al-Qaida. According to the intelligence official, Zarqawi in the late 1990s was responsible for bombing Shiites in Iran from his base in Pakistan where he was associated with the militant SSP party.

The Sunni Arabs, once the leading political group under Saddam Hussein, feel threatened and made politically impotent by the Shiite majority, according to U.S. officials.

This partly explains their leadership of a broad, deeply entrenched insurgency designed to humiliate American military power, keep the bulk of the Sunni population on the fence, and rally anti-U.S. forces in the region, U.S. officials said.

While the Shiites and Kurds are eager to participate in the upcoming elections, the Sunnis are indifferent, U.S. officials said. "They feel they don't have a dog in this fight," a former senior CIA official said.

Another problem is the Iraqi middleclass, many of them Sunni, and almost all of them anti-American, according to Marr. "They disliked us in the past because the U.N. sanctions made them suffer. When the war came, they had expectations that were much too high. Then they became passive and they won't work with us, and yet this is the only chance they're going to get."

"The Sunnis and Shiites don't like the occupation and want us out as soon as possible," she added. "Their idea is that if a security force is needed, they want to do it themselves."

The Sunnis are also divided. "Iraq is such a complex mosaic that breaks down into terribly diffuse groups," Marr said. "In places like Mosul, Basra and Baghdad, the Sunnis are secular professionals who look down their noses at the tribes and Shia."

Outside of Baghdad and the cities, the Sunnis are "isolated, and, by history, clannish and tribe-oriented," she said.

"But even with the Shiites, there is no real unity there either. Some are Iran-oriented, others are more secular," Marr said.

The war has made all three groups, Kurds, Shiites and Sunni, "crawl into themselves," she said.

And the future? "All sorts of ugly things could happen -- the Kurds could declare independence or the split between the Shiite and Sunni could deepen. The new Iraqi state could fail," an administration official said.

For Marr the outlook was also grim: "The whole Bush administration policy has been outrageously careless" and because of this, she said, the tenuous unity of Iraq "could break down."

Said former senior CIA Iraqi analyst Judith Yaphe: "Elections will not solve anything -- we are grasping for events that will enable us to get out of Iraq, but there are no such thing. Democracy is not an event but a process."

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