Six long years after the allied invasion to topple Saddam Hussein, Iraq regained full control of its cities yesterday when American troops pulled back to the countryside. Iraqis celebrated the landmark occasion with an outpouring of pride, patriotism and parades. The Government declared National Sovereignty Day, Nouri alMaliki, the Prime Minister, spoke in a television address of an “achievement made by all Iraqis”, and cars drove through the streets draped in flags and plastic flowers.

The upsurge of hope and optimism is welcome and sorely needed. For the bitter realities of the years in which extremist violence and sectarian conflict had pushed the country to the brink of civil war are still all around. Violence has fallen well below the carnage of three years ago. But in the past week there have been two of the biggest bombings for more than a year, which together killed 150 people. Attacks on allied troops are continuing. The US military announced that four soldiers in Baghdad died of combat-related injuries on Monday. Many Iraqis fear that the insurgents will increase their attacks in an attempt to claim credit for the US pullback or to further the extremist aim of igniting a sectarian conflict. Many nervous civilians and politicians are asking the question: is Iraq back to where it was before the success of the US surge?

There is a large element of wishful thinking, both among Iraqi politicians, who claim that the 600,000-strong Iraqi Army and security forces have the situation under control, and among Western politicians preparing for the evacuation of all US forces from Iraq by the end of 2011. The tragedy of the past six years was the fundamental flaw in Western, especially Bush Administration, perceptions of how Iraqis would behave after the overthrow of Saddam. Tribute must be paid to America’s sacrifice, in lives and in money, to end dictatorship and restore hope and rights to Iraqis. But a similar misperception of Iraqi realities may now be held by President Obama and could still cause the delicate political balance in Baghdad to unravel. Hope is not a policy; the Iraqi security apparatus may yet need more technical support and more personnel training.

Mr al-Maliki’s Government, it must be admitted, has proved more stable, achieved far more and shown greater authority than most critics believed possible two years ago. But tensions abound. The Kurds are deeply suspicious of Baghdad’s intentions, fearing that it will try to end their semi-autonomous status in a dispute over oil and land. The al-Maliki administration has also arrested some leaders of the Sunni-based Sahwa (“Awakening”) movement, US-backed neighbourhood guards who once fought alongside al-Qaeda and who are distrustful of the narrowly based Shia-dominated Government.

Mr al-Maliki has still to demonstrate an ability to get the economy running. Corruption has become a serious issue. Foreign investors are still wary. And the key issue, the revival of Iraq’s oil industry with the participation of multinationals, is not being well handled. Crucial negotiations with consortiums bidding for rights in several big oilfields broke down yesterday, when Chinese, US, Italian, British, Dutch and South Korean companies rejected Iraq’s terms. The prices were so far apart — $25.40 per barrel demanded by some foreign operators compared with an offer of only $2.30 by the Government — that this first contract auction since 2003 bodes ill for future negotiations.

If violence returns to the streets, the US could return to some of the 120 bases and facilities vacated yesterday. But it would be a terrible humiliation for Mr al-Maliki, a huge complication in US withdrawal plans and a propaganda coup for terrorists. Yesterday was an historic day for Iraq. Tomorrow, Iraq starts to write its own future.