We are approaching another turning point in the Iraq saga.

If this moment is handled well by U.S. officials, Iraq’s prospects will improve. If it is handled badly, Iraq will sink and U.S. casualties will soar.

The turning point involves the Bush administration’s promised handover of political sovereignty to Iraqis by June 30. U.S. officials haven’t been able to come up with a workable formula for the handover. They’re so panicked that they invited a U.N. delegation to Baghdad to try to devise a solution.

Iraqis — and, amazingly, the White House — are anxiously awaiting the U.N. team’s conclusions.

Occupation authorities are stymied on the handoff because of a dispute with the leading Iraqi Shiite cleric.

Ayatollah Ali al-Sistani insists sovereignty can be transferred only to an elected Iraqi assembly. Despite the Bush stress on democracy, U.S. officials want the assembly to be selected, not elected. It would be chosen by a caucus system that is clearly open to manipulation by the U.S.-picked Iraqi Governing Council or by American officials.

U.S. officials insist there is no time to organize direct elections by June 30 and Iraq is too unstable to hold them. In private, they argue early elections would give too much power to Shiite religious parties.

But the debate among Iraqis is focused on a different question: how to set up a legitimate government.

“The magic word is legitimacy,” says one Iraqi. This is the issue Sistani’s insistence on elections has brought to the fore. It can no longer be ignored.

“You cannot call an authority legitimate until there are elections,” says Hussain Shahristani, a physicist who spent 12 years in Saddam’s prisons for refusing to help make a bomb. Shahristani meets regularly with Sistani and members of his circle.

The ayatollah, Shahristani says, recalls that the British excluded Shiites from power for decades. He fears that if sovereignty is handed over to another unelected body like the IGC, it might postpone national elections indefinitely. (The IGC has little contact with ordinary Iraqis and is widely viewed as interested in feathering its own nest.)

Sistani is right to focus on the need for a legitimate government. Elections may now be the only way to mobilize Iraqis who have been too disillusioned by occupation to fight for Iraq’s survival.

Senior Pentagon officials mistakenly believed that Iraq would rally around exiled opposition leaders such as IGC member Ahmed Chalabi. That didn’t happen. U.S. officials now recognize that Iraqis are losing patience with American occupation because it has been unable to stop insurgent violence that is targeting Iraqi civilians.

Iraq is not postwar Japan, where the United States had the legitimacy to rule by fiat for years. Iraqis expected a liberator who would turn over power. With the June 30 deadline, many Iraqis believe that time has come.

U.S. fears of a Shiite religious takeover via elections are probably overblown. “There are good candidates all around Iraq who want to run,” says Laith Kubba, another well-known anti-Saddam activist. If elections for a national assembly were held by province, Kubba thinks they could attract a wide array of talent, even unhappy Sunnis.

Kubba also says elections are the best way to inspire Iraqis to fight the insurgency being waged by Sunni Islamists and Arab terrorists.

“We need to rebuild a national army,” he says. “It is a fake thing, this Iraqi army the Americans are building.” But he says a new army — under civilian control — can be rebuilt only “under a legitimate government.”

Kubba, Shahristani and others believe elections could be organized by fall. If the White House insists on a power transfer by June 30, the United Nations could be made temporary caretaker or supervise a short-term expansion of the IGC. The U.N. imprimatur would convince Iraqis that elections were indeed on the way.

This advice must be heeded not just because majority Shiites might turn against U.S. forces if Sistani is thwarted. Only a legitimate government can keep Iraq from deteriorating further. That is why, if the U.N. mission endorses fall elections, the Bush team should sign on.

Trudy Rubin is a columnist and editorial-board member for the Philadelphia Inquirer.