It’s back to the drawing board, now that Iraq’s most powerful cleric has come out publicly against key elements of the American plan to speed up the transfer of power and prepare for a reduction of the U.S. occupation force. Grand Ayatollah Ali al-Sistani unexpectedly demanded that the scheduled June elections be a direct national ballot instead of the system of provincial and local elections, town meetings and caucuses called for in the American plan. He also insisted on movement toward creation of an Islamic government.

Ayatollah Sistani spoke for Iraq’s majority Shiites, who comprise about 60 percent of Iraq’s 25 million people. They were repressed under Saddam Hussein’s secular minority Sunni rule but could come out ahead in a direct election. Shiite religious leaders could then work to create an Islamic state, which the United States opposes.

President Bush, Defense Secretary Donald Rumsfeld and other administration figures may be correct in asserting that the disorder and insurgency in Iraq will be brought under control before long. But another, more fundamental problem also stands in the way of the administration’s goal of creating a peaceful, democratic, market-economy Iraq that would become a model for reform throughout the Middle East. That is the ethnic and religious rivalry among the Kurds, the Sunnis and the Shiites. Like Yugoslavia, Iraq was created as an artificial, multi-ethnic state held together only by dictatorship.

Assuming the worst case, in which the insurgency and the ethnic divisions resist American efforts, a new proposal is worth considering. Leslie H. Gelb, president emeritus of the Council on Foreign Relations, has suggested moving “in stages toward a three-state solution: Kurds in the north, Sunnis in the center and Shiites in the south.” In a Nov. 25 op-ed article in The New York Times, Mr. Gelb wrote: “Almost immediately, this would allow America to put most of its money and troops where they would do the most good quickly – with the Kurds and the Shiites.

“The United States could extricate most of its forces from the so-called Sunni Triangle north and west of Baghdad, largely freeing American forces from fighting a costly war they might not win. American officials could then wait for the troublesome and domineering Sunnis, without oil or oil revenues, to moderate their ambitions or suffer the consequences.”

Mr. Gelb would start by strengthening the Kurds and Shiites and weakening the Sunnis, then wait and see whether to stop at autonomy or encourage statehood. North and south could first be made into self-governing regions with boundaries drawn along ethnic lines. They would get the bulk of American reconstruction dollars. In return, they would hold regional democratic elections and guarantee protections for women, minorities and the news media.

At the same time, the United States would draw down its troops in the Sunni Triangle and ask the United Nations to oversee the transition to self-government there. Minorities left in the center might need to be moved to the north or south at U.S. expense and with U.S. protection.

Mr. Gelb conceded that the population movements would be a “messy and dangerous enterprise” and that “Washington would have to be very hard-headed, and hard-hearted, to engineer this breakup.” But he concluded that such a course would be “manageable, even necessary, because it would allow us to find Iraq’s future in its denied but natural past.”

His proposal is worth considering as Americans grope together for an honorable way out of what is beginning to look like a no-win situation.