Iraq progress seen after stepping close to "abyss"

By Paul Tait

BAGHDAD (Reuters) - Iraq stepped close to "the edge of the abyss" but is showing signs it can meet political benchmarks set as vital steps towards reconciliation, Washington's top official in Iraq said on Thursday.

Progress was being made on a revenue-sharing oil law, legislation to allow former members of Saddam Hussein's Baath party to take up public posts and on constitutional reform, the three key milestones Washington has set Baghdad's leaders.

U.S. Ambassador to Iraq Ryan Crocker said he was encouraged Iraq had not slipped back into the widespread sectarian violence of a year ago, despite the continued provocation of horrific car bombings, but conceded patience was not "limitless".

"If I had to evaluate today, and looking purely at the security situation, as devastating as the al Qaeda-led chain of suicide vehicle attacks is, that does not in my mind suggest the failing of the state or of society," Crocker told reporters.

Crocker's relatively upbeat assessment was in stark contrast to a report by British think-tank Chatham House which said Iraq was on the verge of collapse, with the government unable to exert its authority across huge swathes of the country.

Washington is pouring tens of thousands of extra troops into Iraq in a last-ditch bid to avert all-out sectarian civil war between majority Shi'ites and Sunni Arabs dominant under Saddam.

The tactic was adopted to buy time for Prime Minister Nuri al-Maliki's government to reach political benchmarks seen by Washington as crucial to national reconciliation. Washington's top general in Iraq will deliver a progress report in September.

"If this were September I think it would be a terrible mistake to conclude that, because they've been able to mount these attacks, that therefore it isn't working, it isn't going to work and we just all need to pull stakes," Crocker said.