A man stands in front of a new chicken restaurant “King of Kentucky Chicken Restaurant,” with two large images of Colonel Sanders on Monday in Fallujah, Iraq. Iraqis have taken full control of Fallujah, the cradle of the insurgency, a major step in taking responsibility for their country. But war damage remains, a new 6 million hospital is barely functioning and officials are worried that militants being released from U.S. custody may come back to settle old scores. The restaurant is inspired by — but not connected to — the American-based KFC.

Fallujah, Iraq ? The Americans are gone from Fallujah, but the “King of Kentucky Chicken Restaurant” is open for business in a bullet-pocked building.

The city that suffered some of the bloodiest episodes of the Iraq war is back under Iraqi control and bursting with entrepreneurial energy, from music stores and restaurants to workmen digging trenches for a long-delayed U.S.-funded sewage network.

But much war damage remains untended, unemployment runs high, farming has fallen into neglect and there are constant fears that the insurgents who waged war are waiting for the right moment to rekindle the conflict.

This city of 400,000 was the heartbeat of the uprising that followed the U.S.-led invasion of Iraq — notorious for bombings, the killing of 17 people when U.S. paratroopers fired on protesters, and the ambush in which the burned bodies of four Blackwater security company men were hung on a bridge.

In November 2004, with Fallujah in insurgent hands, the U.S. military launched an operation to recapture the city. After 45 days that saw some of the heaviest urban combat for Americans since the Vietnam War, the U.S. announced it had crushed the last pocket of resistance in Fallujah.

Of at least 225 Americans who have died in action in Fallujah since the invasion, 78 were killed in the final operation, according to Pentagon figures. Insurgent losses were estimated at about 1,350.

U.S. forces continued to control the city tightly until last month, when they quit the last of their posts inside Fallujah. Now the city 30 miles west of Baghdad is a testing ground for the Iraqis’ ability to keep the peace unaided.

Security is uppermost in people’s minds here, their worries heightened by two suicide bombings in the Fallujah area this month that targeted Sunni clan leaders who fought against the insurgents. One of the bombers was thought to have recently been freed from Camp Bucca, the U.S. detention center in southern Iraq.

Thousands of detainees have been freed from U.S. custody in recent months to comply with a U.S.-Iraqi security pact that took effect on Jan. 1, and there are fears some of them will try to join up with al-Qaida sleeper cells.

“Bucca has reinforced their extremist ideology since the most radical detainees are kept together away from the rest,” said Mushtaq al-Eifan, a prominent clan member who fought al-Qaida.

However, Fallujah is relatively calm, though its notoriety appears to endure.

Mayor Sheik Hameed Hashem says he is struggling to staff to capacity a $46 million, 200-bed hospital just built with government funds because of misconceptions about security in Fallujah. He is promising housing and police protection for out-of-town doctors who agree to work at the hospital.

Meanwhile, as Fallujah recovers some of its traditional vigor as a transport and trade hub, it is feeling pressures of a different sort — falling oil prices.

Hashem says his 2009 budget has been slashed by two-thirds to around 50 billion Iraqi dinars (about $43 million) because of the slump in oil earnings that underpin government revenue.

With unemployment at about 30 percent, he said he needs money for industrial and farming projects to create jobs. Also, he said he needs to build a power station as the government provides only 25 percent of Fallujah’s electricity needs and the rest comes from private generators.

Still, in ways both big and small, the city is struggling back to normalcy. Music shops, torched or forcibly shuttered as un-Islamic during the seven months of 2004 that al-Qaida and its allies controlled the city, are open again.

Ismail Haqi’s “Kentucky” restaurant, its name posted in Arabic with two large images of Colonel Sanders, opened two months ago on a main street of Fallujah and offers a meal of chicken, fries and soda for the equivalent of about $4.50. The restaurant is inspired by — but not connected to — the American-based KFC.

“I decided to bring to Fallujah a global name,” said Haqi, 19. “Some people come up to me and say ‘this is an American company and we suffered so much in Fallujah at the hands of the Americans.’ But I tell them that Kentucky exists across the world, so why not here?”