Retired four-star Gen. Barry R. McCaffrey isn’t quite ready to give up on Iraq.

He’s certainly not blind to the problems. Consider his March 26 report (it’s at www.mccaffreyassociates.com): “Iraq is ripped by a low-grade civil war which has worsened to catastrophic levels. …

“Three million Iraqis are internally displaced or have fled the country … a huge brain drain that imperils the ability to govern …

“There is no function of government that operates effectively across the nation …

“The police force is feared as a Shia militia in uniform …

“U.S. domestic support for the war in Iraq has evaporated and will not return.”

And yet he still sees a chance, thanks to a new commander, Gen. David Petraeus; a change in tactics; and the survival instincts of the Iraqi leadership.

“Everyone says this is over. I don’t think it is,” McCaffrey said during an interview last week at the Philadelphia office of the engineering and architectural firm HNTB Corp., where he serves on the board. “These (Iraqi) people – they’re smart people – and it is just so miserable living in Iraq right now. It’s beyond belief.”

McCaffrey, who has decades of military and combat experience from Vietnam to Desert Storm, has been regularly reporting on conditions in Iraq and Afghanistan since his five-year term as drug czar ended in 2001.

He says Iraqis are starting to realize they are running out of chances to save their country, and, as bad as life is, conditions could still get much worse.

“Do they really want to turn into Pol Pot’s Cambodia?”

The greatest challenge facing Petraeus, McCaffrey says, is not directing the day-to-day military efforts – “Lt. Gen. (Raymond) Odierno and the troops are phenomenally courageous and competent. They’ll do that” – but working with U.S. Ambassador to Iraq Ryan Crocker to persuade the senior Shia and Sunni leadership to “back off the ledge” and not dive into a worsening sectarian maelstrom.

“My head tells me the situation doesn’t look great, but why shouldn’t it be possible for us to get that kind of response out of the Iraqis?” McCaffrey asks.

Americans have a right to be impatient but need to be realistic about expectations, McCaffrey says.

While politicians in both parties eagerly await Petraeus’ September report, McCaffrey doubts whether that’s enough time to fairly evaluate the new tactics.

“It is absolutely ludicrous to think that a modest increase of 30,000 troops in Baghdad by September can have any fundamental impact on the political, military or social dynamics at work in that disputed land,” he says.

“February sounds more likely. By then you can say if there’s a trend or if it’s ephemeral. … September? Come on, the last brigade is closing right now.”

He feels just as strongly about imposing Washington’s conventional wisdom on Iraqi politicians as benchmarks. One example, he doesn’t like the idea of bringing former Baathists back into the government.

“Why should anyone dream that the Shias and Kurds are going to let back in bureaucrats who dominated the government entirely under Saddam? … Why would they trust a Sunni back in power?” McCaffrey asks.

“It’s not illogical for the Shia to fear reversion to slave status,” he says. “So by September, are they going to change all this stuff? I don’t know why they would. Are we going to claim that as failure?”

McCaffrey is encouraged by some aspects of the current situation: the change in tactics that have U.S. and Iraqi forces holding areas cleared of insurgents; the numbers of Iraqi army and police committed to the fight in Baghdad; the growing Sunni opposition to al-Qaida in Iraq; and the increase in resources and equipment for the Iraqi army – though still not enough for them to be self-sufficient.

But to show that the situation has turned around, McCaffrey says, “By Christmas, you’ve got to be able to drive around Baghdad in two Humvees and consider it unusual to be fired on. Right now, you ought to expect you’re going to be attacked.”

If Iraq doesn’t get there, McCaffrey says, it won’t be the fault of U.S. troops – “the most courageous, competent military people we’ve ever had in uniform.” They can provide the security, but then the Iraqi leaders must act.

The question for those leaders, McCaffrey says, is, “Do they really want to fight it out for another five years and destroy the rest of their society? We’re about to find out.”