As U.S. personnel hunkered down in Baghdad’s Green Zone under rocket barrages, and TV screens flashed scenes of violence in Baghdad and the southern city of Basra, President Bush had this to say on Thursday: “Normalcy is returning back to Iraq.”

Hmmm …

On Friday, the president said: “This is a defining moment in the history of a free Iraq.”

So, in case you’re confused about what is happening in this latest Iraq chapter, let me explain as best as I’m able. This sudden surge of violence, less than two weeks before Gen. David Petraeus and U.S. Ambassador Ryan Crocker are due to testify before Congress, may indeed be a defining moment. The grim question is whether it will define things for better or for worse.

The crisis began when Iraq’s Prime Minister Nouri al-Maliki, a Shiite, launched a military offensive supposedly aimed at crushing gangs and armed militias in Basra. Basra province produces most of Iraq’s oil; Basra city is Iraq’s only port, through which most of the oil is exported. The city is a lawless disaster zone, where three armed Shiite militias compete for power; they siphon off an estimated 300,000 barrels of oil each month.

The British had control of Basra, but let the militias flourish and penetrate the police force. In September the Brits pulled their troops out of the city; they now have around 4,000 soldiers huddled at the airport. They don’t want to do any fighting.

Basra is probably an ugly preview of what will ensue if the next U.S. president pulls U.S. troops out of Baghdad too quickly – a collapse of weak governmental institutions, with Iraqi factions fighting one another once foreign forces no longer separate them.

So, in principle, it wouldn’t be a bad thing for Maliki to re-establish law and order in Basra. It would signal three positive things: that the weak, dysfunctional Maliki government could actually achieve something, that Iraqi security forces were able to operate on their own, and that Maliki was willing to take on militias of his own Shiite sect (as President Bush praised him for doing).

But – here’s the reality check on Bush’s rosy picture of what is taking place.

First, sources in Baghdad tell me Maliki planned this operation without prior consultation with the Americans. The president tried to spin this as a good thing – Iraqis finally taking “the lead.” That might be true if the Iraqi premier knew what he was doing.

But the inept Maliki seems to have gotten himself in way over his head. His impulsive move holds big risks for U.S. policy, and the timing couldn’t be lousier: just as Petraeus and Crocker leave for the United States.

Maliki rushed down to Basra himself last week and set a Friday deadline for the militias to surrender, which they ignored. His troops appear to be making little headway, and could be humiliated. Meanwhile, fighting has erupted in previously quiet Shiite neighborhoods of Baghdad. “He is way out in front of realities,” is how retired Gen. Jack Keane, an adviser to Sen. John McCain and an architect of the “surge” idea, described Maliki’s operation.

Second, the Basra attack, far from being an impartial crackdown on Shiite militias, seems targeted at one in particular, the so-called Mahdi Army of radical cleric Muqtada al-Sadr. Many think the attack is meant to influence upcoming provincial elections scheduled for October in favor of a Maliki ally.

Most of the provincial governments are now controlled by the largest Shiite Party, the Islamic Supreme Council of Iraq (ISCI), which supports Maliki and has its own militia in Basra. Sadr’s group was expected to defeat ISCI in several provinces, so Maliki’s operation may be a preemptive strike at Sadr’s forces.

Again, if Maliki could establish law and order in Basra, many Iraqis might cheer even if this had nothing to do with the “even-handed justice” cited by Bush. However, the Basra battle is likely to have the opposite result – an increase in lawlessness and violence. It threatens to undermine the much-touted Iraqi “surge” gains of the past few months.

One of the key reasons that U.S. and Iraqi casualties have fallen this year is because Sadr has observed a cease-fire over the past seven months. His Mahdi Army has (mostly) refrained from killing Sunnis and American troops. U.S. commanders have taken on “rogue elements” of the Mahdi army, but have no desire to be drawn into a major battle with Sadr on Maliki’s behalf. Such a battle would jeopardize the cease-fire and would distract from ongoing efforts in the north of the country to eliminate the remaining forces of al-Qaida in Iraq.

If Sadr ends his truce, Baghdad could once more be convulsed by violence. Sadr’s thugs might renew their ethnic cleansing of Sunnis in remaining mixed areas of the city; Sunni militias now allied with U.S. forces might return to the sectarian fray. Hopes for further U.S. troop withdrawals this year would fade. (And by the way, withdrawing U.S. troops would have to pass through southern Iraqi roads, where Sadr’s forces have strongholds.)

Maliki may back down and the situation settle into a less stable version of the status quo ante. What’s unlikely is that the Iraqi leader’s impulsive move will be the defining moment the president envisioned. Let’s hope it doesn’t undermine the fragile gains that gave Iraqis some hope that their nightmare might finally end.