One day early in 2004 as I was eating a meal in the green zone, the seven-square-mile enclave of air-condi-tioned comfort in Baghdad, I asked one of the Americans at my table what he thought of the massive suicide bombs that had killed dozens of people at a Shi’ite shrine in the city that morning. “Yeah, I saw something about it on my office television,” he replied. “But I didn’t watch the full report. I was too busy working on my democracy project.”

It was a measure of the air of unreality in the green zone during the 14 months that the American viceroy Paul Bremer presided over the occupation government in Iraq. This fortified compound around Saddam Hussein’s presidential palace was Little America: most of the staff had never worked outside the United States and about half had obtained their first passport to travel there.

I have detailed some of the absurdities of life inside the Baghdad bubble in my book Imperial Life in the Emerald City, which was inspired by my two years as the Washington Post’s bureau chief in Baghdad. One 24-year-old official with no background in finance was given the job of resurrecting the Baghdad stock exchange. Another aide, tasked with devising new traffic regulations, down-loaded those of Maryland from the internet. A 21-year-old charged with helping to rehabilitate the interior ministry boasted that his most meaningful job to date had been as an ice cream truck driver.

Three years on, the carnage continues. As a “surge” of 28,000 American troops were deployed in and around Baghdad last week, a suicide bomber detonated a lorryload of explosives outside one of the city’s most famous mosques, killing more than 80 people and injuring dozens more.

Iraq timeline: five years of conflict

From accusations that the weapons of mass destruction dossier had been sexed-up to withdrawal of British troops from Basra

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Inside the green zone, only the main players have changed. True, the Americans are still there, but as diplomats at the US embassy, contractors and security guards. They are not the focus of concern at present, but rather the Iraqi leadership, which is dangerously disconnected from the reality on the ground. The results are as pernicious as those of ambassador Bremer’s isolation.

The sectarian fighting that is occurring on the streets is not simply about religious zealotry.

It’s a naked grab for power that begins inside the green zone, where Iraqi political leaders are fighting for influence. They continue to bicker with one another because they are largely cut off from the consequences. They do not live in fear that their neighbours might turn on them or that Shi’ite militiamen or Sunni insurgents might come and kill them.

The US military surge is intended to create security so that political leaders will come together to pursue national reconciliation and lead ordinary Iraqis to support their government. I think these two goals are long shots at best.

Why are Iraqi leaders not moving more quickly to agree on the most divisive issues of the day, such as rolling back elements of the American policy of deBa’athification or finding an equitable way of sharing oil revenue? They’re not doing so because they think it’s in their interest to continue jockeying for the upper hand.

At present, the Shi’ite Arabs and Sunni Arabs each believe they possess the strength to vanquish the other. The Shi’ites tell themselves: “We’re 60% of the population; we have powerful militias and we actually control the government. We’ll be able to beat the Sunnis into submission.” Many Sunnis, on the other hand, believe that if they fight hard enough they will be able to regain the position of power they enjoyed under Saddam Hussein.

Unlike American politicians, Iraqi leaders do not calculate in terms of the next three or six months but take a long view over the next 30 or 60 years. What the Republicans and Democrats in Washington do not seem to understand is that neither side is going to compromise until they conclude that it’s a rational thing to do.

The military option is the only one America has left. The days of America’s ability to influence the Iraqi government, when Bremer called the shots, are gone. Most of the billions of dollars for reconstruction have been expended, so money has little sway. Military force has become the last arrow in the US quiver.

I believe we could have done a better job if we had played our cards differently. Having worked in Baghdad during Saddam’s rule, I thought the US would be able to pull it off. The Iraqis were genuinely happy to see us. While I never witnessed American soldiers being greeted with flowers and sweets, I did see young boys hand cans of Pepsi to American servicemen.

When I introduced myself to Iraqis as an American reporter after the fall of Saddam, I would be embraced and invited into people’s homes. The greatest danger I faced was being served tea with water pumped directly from the Tigris river. But when America and Britain asked the United Nations for the authority to occupy Iraq, local perceptions of both countries changed. We went from being loved to being despised.

Our political capital was further attenuated by a series of blunders by the coalition authority. Like many others, I assumed we would send our smartest people and make available the necessary resources to rebuild the country. Had we done so, perhaps the civil war and the insurgency would be much smaller and more containable.

Iraq was rather like a broken-down bus. The Iraqis wanted the Americans to fix a few things under the bonnet and get it going. It might have been belching smoke and not going very fast, but at least it would have had some forward direction.

Bremer and company arrived with the best of American earnestness and declared: “We’re going to build you the best bus you’ve ever seen.” They asked the passengers to wait in their seats while they removed the engine and rebuilt the bus bolt by bolt. And eventually they would have built a damn good bus, if allowed to do so, but the passengers didn’t want to sit around. They wanted to get moving and have a say in where they were going.

The British who came to work for the occupation government understood more quickly that things were not heading in the right direction. In general they were more qualified than their American counterparts: many were career diplomats who spoke Arabic and had a sense of the region’s history. Nothing better summed up their disillusion than a piece of paper pinned to a cork board at their bar. It read: “Yee-haw is not a foreign policy.”

Often the Americans treated the Brits as junior partners. On one occasion Bremer gave Sir Jeremy Greenstock, who was Tony Blair’s special representative, a dressing-down for daring to question one of his decisions.

In at least one respect the Brits had a degree of foresight that American planners lacked. Instead of living in second-rate trailers supplied by Halliburton, they had theirs outfitted by Ikea and anticipated mortar attacks on the green zone by setting up their trailers in a parking garage with a cement covering that gave them an added layer of protection.

Last week The Washington Post revealed a leaked memo from Ryan Crocker, the newly installed American ambassador in Baghdad, calling on Washington for more and better qualified staff. It shows we still have not got it right.

As General David Petraeus tries to pacify Baghdad neighbourhood by neighbourhood, we still have economic officials in the green zone who are working on how to get Iraq to join the World Trade Organisation.A noble goal, but at a time when security forces are trying to prevent all-out civil war, once again it seems oddly disconnected from reality.

Last week Rajiv Chandrasekaran won the Samuel Johnson prize with his book Imperial Life in the Emerald City: Inside Baghdad's Green Zone, published by Bloomsbury, £12.99. He was talking to Stuart Wavell

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