At the start of the military offensive launched last week into Basra by US-trained Iraqi army forces, President Bush called the action by Prime Minister Nouri al-Maliki “a bold decision.” He added: “I would say this is a defining moment in the history of a free Iraq.”

That’s true–but not in the way the President meant it. As the smoke clears over new rubble in Iraq’s second city, at the heart of Iraq’s oil region, it’s apparent that the big winner of the Six-Day War in Basra are the forces of rebel cleric Muqtada al-Sadr, whose Mahdi Army faced down the Iraqi armed forces not only in Basra, but in Baghdad, as well as in Kut, Amarah, Nasiriyah, and Diwaniya, capitals of four key southern provinces. That leaves Sadr, an anti-American rabble rouser and nationalist who demands an end to the US occupation of Iraq, and who has grown increasingly close to Iran of late, in a far stronger position that he was a week ago. In Basra, he’s the boss. An Iraqi reporter for the New York Times, who managed to get into Basra during the fighting, concluded that the thousands of Mahdi Army militiamen that control most of the city remained in charge. “There was nowhere the Mahdi either did not control or could not strike at will,” he wrote.

The other big winner in the latest round of Shiite-vs.-Shiite civil war is Iran. For the past five years, Iran has built up enormous political, economic and military clout in Iraq, right under the noses of 170,000 surge-inflated US occupying forces. (For details, see my March 10 Nation article, “Is Iran Winning the Iraq War?“) Iran has strong ties to Iraq’s ruling Shiite alliance, which is dominated by the Islamic Supreme Council of Iraq, whose militia, the Badr Corps, was armed, trained, financed and commanded by Iranians during two decades in exile in Iran. Since then, hedging its bets, Iran built a close relationship to Sadr’s Mahdi Army as well, and Sadr himself has spent most of the time since the start of the US surge last January in Iran. In addition, Iran has armed and trained a loose collection of fighters that US military commanders call “Special Groups,” paramilitary fighters who’ve kept up a steady drumbeat of attacks on American troops. Thus, it was no surprise when Hadi al-Ameri, the commander of the Badr Corps and a leading member of ISCI, traveled over the weekend to Iran’s religious capital of Qom to negotiate the truce with Sadr that resulted in a shaky ceasefire in Basra.

That Sadr emerged victorious, and that Iran succeeded in brokering the deal that ended the fighting, is a double defeat for the United States. It is also a catastrophe for Maliki, and there is already speculation that his government could collapse. An ill-timed offensive, poorly prepared and poorly executed, resulted in an embarrassing defeat for Maliki.

Why was the offensive launched in the first place? By all accounts, Maliki, his faction of the ruling Islamic Dawa party, and ISCI intended to crush Sadr in Basra for reasons both political and strategic. Political, because Sadr’s movement is positioned to register a massive win at the polls in Basra and throughout southern Iraq in provincial elections scheduled for October, an electoral defeat that would portend the end of the Dawa-ISCI regime. Strategic, because Basra is the economic engine of all of Iraq. The city controls Iraq’s South Oil Company, which pumps and exports the vast majority of Iraq’s oil–and for years Basra has been under the control of militias loyal to Sadr and to a Sadrist splinter party, the Fadhila (Virtue) party. By controlling the Oil Protection Force, a quasi-military force, and through its own militia, Fadhila is an important player in Basra, too, and Basra’s governor is a Fadhilist. Though Fadhila has had its own clashes with Sadr’s Mahdi Army, Fadhila kept its powder dry in the recent fighting, and there is no doubt that Fadhila is a bitter opponent of the Dawa-ISCI alliance. Last year, Maliki tried to oust the governor of Basra, Mohammed al-Waeli, who defied Maliki and refused to step down.

Maliki, miscalculating badly, flew to Basra last week from Baghdad to personally oversee the assault on Sadr’s forces. In so doing, he staked his prestige on the offensive. If indeed it has failed, Maliki has lost face. That the ceasefire ending the fighting was worked out in Qom, Iran, and mediated by Tehran, is doubly embarrassing for him.

But it’s far worse for the United States. President Bush strongly backed Maliki since the Battle of Basra started. According to Steve Hadley, the president’s national security adviser, the decision to act in Basra was taken jointly between Washington and Baghdad. And US air power and even some ground units supported the floundering Iraqi forces, whose weakness and incompetence were revealed for all to see. After five years of massive US training and equipment, the Iraqi armed forces weren’t even able to take control of Iraq’s second-largest city.

Adding to Bush’s utter humiliation, the Iranian-negotiated truce was mediated by the commander of the so-called Quds Force of Iran’s Revolutionary Guard Corps, Brigadier General Qassem Suleimani, who brought Sadr’s representatives together with Hadi al-Ameri, the Badr Corps commander and the leading aide to Abdel-Aziz al-Hakim, the ISCI leader. The Quds Force, you will recall, was only last year designated as a “terrorist” entity by the US government. So President Bush’s “defining moment” is this: the head of an Iranian “terrorist” force has brokered a deal between the two leading Shiite parties in Iraq, Sadr’s movement and ISCI.