South America, Africa and the Caribbean have also seen serious drug problems emerging. In Europe, though the rapid rise of cocaine use has slowed, an estimated 5.3 percent of the population used cannabis in the past year and heroin and crack use is still increasing in many regions.

Antonio da Costa, director of the UNODC, said global demand reduction measures in recent years had been “lackluster [and] uninspiring.” In 2001 the office estimated that around 180 million people used drugs in the world. The number is now thought to have increased more than 10 percent, to about 3.5 percent of the total global population.

The results will disappoint campaigners and administrators who have struggled for years against one of the world’s biggest industries and will fuel fears that the “war on terror” has distracted from efforts to restrict the production and use of narcotics.

“There has been a lot of effort, but has the world suddenly said: ‘Ooh, we don’t like drugs’? No, nor is it likely to in the near future,” said Harry Shapiro, of the British charity Drugscope. A UNODC spokesmen admitted that drugs had dropped down on the international agenda after 9/11 and the subsequent focus on radical Islam. “There is not the interest these days,” the spokesperson said. “People seem to have dropped the ball.”

One of the biggest problems has been the explosion of amphetamine-type drugs, especially in the Far East, where their use is becoming endemic. Such drugs are now a “global phenomenon,” says Koli Kouame, of the International Narcotics Control Board, another U.N. body. “This is a very contagious phenomenon among the youth,” Kouame said.

The American report shows that demand for drugs has increased in more than three-quarters of some 150 countries surveyed.

A number of countries have recorded surprising consumption levels — Israelis are said to use 100 tons of marijuana, 20 tons of hashish, 20 million tablets of ecstasy, four tons of heroin, three tons of cocaine, and hundreds of thousands of LSD blotters annually.

In Lithuania, there has been a boom in abuse of methadone-type artificial heroin substitutes, while the number of registered heroin addicts in Belarus has doubled. In Finland and Estonia, surveys show an increasing appetite among young people for amphetamine-type stimulants. There have even been drug busts in Iraq — where traffickers have taken advantage of post-invasion chaos to traffic hashish — and in Syria.

“It just goes to show that whatever the penalties — hanging, imprisonment, chopping off hands — there will always be someone who is prepared to traffic, distribute or use drugs,” said Shapiro.

Robert Charles, the American official in charge of Washington’s fight against drugs, has been keen to stress the positive. “The metrics, I think, are beginning to bear out a degree of real success in counter-narcotics and money laundering,” Charles said last week. “Winning the drug war does not mean that we sort of roll up all bad guys and all future bad guys and … go home and do something else. It means that we make steady progress in reducing these threats to our security.” The major achievements, according to Charles, are significant reductions in cocaine production in South America, especially in Colombia, and of opium in the Far East.

However, all drugs experts agree that the massive opium harvests in Afghanistan dominate the landscape. The UNODC hopes that the sheer size of last year’s crop — 4,200 tons — will mean less being planted in coming years, as a glut brings down prices. However, the cheap drugs are already having an impact. According to da Costa, 30 countries reported a rise in heroin use since 2003, 25 were stable and only 18 reported a decrease.

So what is the truth? How bad is the situation? Are there any positive signs? Just what does the future hold for Iraq?

Once the road from Baghdad airport ran between rows of slender date palms. Now the trees are gone, stripped out to deny cover to insurgents. Though squads of the new Iraqi National Guard — the local security militia founded and trained by the now defunct coalition authorities — loiter in the dusty scrub along its verges and American troops roll along the pitted tarmac in their armored, air-conditioned humvee Jeeps, the road is still one of the most dangerous in the country. The shuttle bus driver ferrying passengers to the renovated terminal yells at anyone who uses a mobile phone in case they trigger a roadside bomb. Vehicles weave to avoid snipers on bridges.

On one side is Camp Victory — the huge headquarters of the 140,000 American soldiers in Iraq — with its vast truck parks, ranks of armored vehicles, 24-hour “chow halls,” prison and rows of trailer cabins. Opposite are the suburbs of western Baghdad: dirt poor, rubbish-strewn and violent. Beyond them lie the Sunni Muslim-dominated badlands around Fallujah and Ramadi, now totally beyond the control of either the new Iraqi government or the Americans.

The scene appears to epitomize all that is wrong with Iraq. The Americans hunkered down in their bases, bandit country beyond the blast walls, and weak and uncertain Iraqi authorities with no authority in their own land.

But, as you head into the center of the Baghdad, things change. Traffic builds up. If it is evening, restaurants in wealthy suburbs such as Karada and Mansoor are busy. Despite the risks, people sit out on the pavement drinking tea. Shop windows are full of expensive consumer goods. Bizarrely, drive through most of Baghdad and there is little on the surface, other than the concrete barriers and barbed wire around government buildings and the occasional dull thump of an explosion in the distance, that distinguishes it from any other scruffy, parched, poor Middle Eastern city.

Analyses tend to veer to extremes — the country is on the brink of anarchy; elections scheduled for January will bring success and stability; the country has risen up against the occupation; the government is popular. The truth is more complex, a mix of some good and much that is very bad, of the mundane, the horrific and the extraordinary. It is the story of people trying to lead normal lives in a world turned upside down.

In the high-ceilinged lounge of her old, ivy-strewn house in Karada, Nawar Sahhar, 49, rearranges the rosaries around a faded picture of Christ. There have been reports that widespread persecution is forcing Iraqi Christians to leave, but Sahhar says she gets on with all her neighbors, “Shiite, Sunni, whoever.”

She does want to leave Iraq but not for fear of sectarian violence. She wants treatment for her severely disabled daughters, ages 13 and 10, and “a better life.” Her litany of problems is familiar to almost all Iraqis: Her husband has not worked for five months, food costs have rocketed, electricity and clean water are still scarce and, above all, there is “no security.”

“I was so happy when the U.S. came. We had no freedom under Saddam,” she said. “But we are so scared now we have no freedom either.”

In fact, though there is more fighting between insurgents and U.S. troops, many Iraqis say that their personal security has improved, albeit marginally, in the past six months in much of Baghdad. In addition, electricity is available four out of every six hours instead of two. And salaries — for those with jobs — have increased. But the pace of progress is so slow that, even in the better areas, such minor improvements go unnoticed, and large parts of the city are yet to experience any significant change since the invasion last year.

Security and reconstruction, everyone agrees, go together. Both Sunni and Shiite militants said lack of progress on basic utilities was critical to their decision to fight. Sadr City, the northern slum district where around 2 million poor Shiites live, has seen fierce battles in recent weeks.

“They promised us everything and gave us dirt,” said Khalid Hadu, a Shiite fighter who was a soldier until the controversial demobilization of the army last year. The 23-year-old, speaking in the ruined center of the shrine city of Najaf during fighting last month, was there to “fight the occupation.” Sunni militants agree. “It’s a matter of pride. We were deceived,” one told the Observer.

But reconstruction, entrusted by Washington to around 15 leading American companies, relies on foreign investment and expertise. And the threat to foreigners in Iraq is currently higher than it has ever been.

Mahmudiya is a scruffy town in desiccated farmland just south of Baghdad. It lies across the main road south and is one of the most dangerous spots for foreigners in Iraq. The local Sunni tribes were heavily influenced by radically conservative strands of Islam imported by Saudi Arabian clerics, and gangs of insurgents and criminals cruise the streets looking for Westerners to kill or kidnap. Reporters drive through at dawn in fast, nondescript cars, lying on the back seats with their fingers crossed.

Not all get through. Two French journalists were seized here last month. Dozens of Arab truck drivers were also captured. Several have been decapitated. A major operation by the Iraqi police and the American army two weeks ago has had no obvious impact.

It is hard to identify the kidnappers. They include radical Islamic groups aiming to strike a blow against the “crusaders,” nationalist insurgents looking to disrupt reconstruction and gangsters. “This is a fluid situation no one has a handle on,” said one security expert.

The resistance is equally diverse. According to intelligence officers, the British army in the south of Iraq faces four threats: “former regime loyalists,” the Shiite al-Mahdi militia, al-Qaida or affiliates, and criminals.

In Basra, where the British are still broadly popular, the numbers involved in violence are small. Though highly professional, the former Baathists may be only a few score strong. Military intelligence estimates that the Mahdi army, which fought bitter battles in August and wounded a soldier on Sept. 17, may number less than 500. And there are no more than a handful of Islamist militants linked to groups such as that of Abu Musab al-Zarqawi, the Jordanian-born jihadi operating out of the militant-run enclaves further north. Then there are smugglers — of oil, arms, people and drugs. Resistance leaders say there is little cooperation between the groups.

But any one problem — such as the continuing disruption of the oil supply around Basra — can be the result of the uncoordinated efforts of many different actors. Thieves steal copper power cables; local tribes destroy the lines that funnel electricity generated locally to the north; former Baathists hit pipelines. The whole situation is confused by the new Iraqi Ministry of Oil’s release, wittingly or otherwise, of erroneous figures that, by indicating less supply, drive up world oil prices. As ever in Iraq, nothing is quite what it seems. Simple analyses — and simple solutions — don’t work.

For three weeks in August, Najaf was a war zone. Apache helicopters blasted volleys of missiles into positions held by Mahdi militia around the holy shrine. Tanks and snipers battled their way through narrow, rubble-strewn streets. The Americans lost 14 men, the militia five times as many. Dozens of civilians died. A truce brokered by Grand Ayatollah Ali al-Sistani, the most senior Shiite cleric in Iraq, brought a tenuous peace, but the conflict was left unresolved.

Last week American jets struck a series of targets in Fallujah, reportedly “al-Zarqawi safehouses.” Arabic-language satellite TV channels broadcast footage of hospitals filled with casualties, many clearly noncombatants. Fallujah and several nearby towns are currently run by local tribal sheiks, in alliance with Islamist radicals, continuing a long tradition of resistance to central rule. Much of the northern city of Mosul and the towns of Samarra and Baquba are also contested.

Mouwaffaq al-Rubaie, the new Iraqi national security advisor, told the Observer that “no armed militia” could exist in “the new democratic, federal Iraq. If there are problems, let’s talk about them. But they must put down their guns,” he said. But the timetable is less certain: “Your guess is as bad as mine.”

Time is running out. The elections scheduled for January are critical. “We need a legitimate, representative administration here,” said one Western diplomat in Baghdad. “Otherwise we’re going to hell in a handcart.”

Senior figures in the Mahdi army indicated to the Observer that they might join the electoral process. “We want to be in the new Iraq and help its people,” said one. Shiites comprise at least 60 percent of the Iraqi population, so have a strong interest in elections going ahead.

But the Sunnis — or at least the minority who actively back the insurgents — will be harder to bring “into the tent.” They comprise 15 to 20 percent of Iraq’s 25 million and, as Iraq’s former elite, have far more to lose.

With Iraq voting en masse for a single card of candidates, not by individual constituencies, it would be possible to go ahead with an election even if Fallujah and other resistance enclaves are outside government control. Prime Minister Iyad Allawi says he will not let 300,000 people in the Sunni triangle hold up national polls. But the key will be the views of the Iraqi people.

Hundreds of conversations with Iraqis — from senior ministers to beggars — reveal that most Iraqis are very pleased Saddam Hussein is gone, don’t like the Americans’ presence, don’t like the insurgents much either, and are prepared to give Allawi and his government a chance. They want elections, better provision of basic utilities and an end to violence. They believe Islam has an important role to play in their identity and do not want their country split into independent ethnic or religious blocs. There is, as anywhere, a wide range of political views. During the battles in Najaf, some local people brought water to the Americans and the government forces; others were angry at all the combatants; some were angry at Allawi — “Bush’s dog, Blair’s puppy,” one shopkeeper called him.

American diplomats claim that Iraq has been handed back to the Iraqis. This isn’t entirely true, at least where policies directly affect security and U.S. military operations. An amnesty offered by Allawi to insurgents was diluted under pressure from the U.S. until it was meaningless. And the new prime minister seems unable, or unwilling, to end the airstrikes that have so far failed to kill many militants and have enraged the local populace.

But the lineaments of a new nation are emerging. Ironically, much of it looks like Saddam’s Iraq, though without the systematic repression. Appalling bureaucracy is back, along with rabid graft. “The smell of corruption is overwhelming,” said a senior advisor at the Ministry of Oil. The new police see their job as maintaining order — in a brutal, often lethal fashion — not protecting citizens against crime. The government has responded harshly to media criticism, closing the offices of al-Jazeera and harassing journalists. Allawi has even created a secret intelligence service and talked of “emergency powers” to counter violence. All of this confirms a prewar memorandum to Tony Blair from senior U.K. government advisors, revealed last week, pointing out there was no certainty that any “replacement regime” in Iraq would “be any better [than Saddam's].” The memo even raised the possibility of a new government seeking weapons of mass destruction.

Much of this is very popular with Iraqis. One Baghdad-based businessman said he wanted to see criminals executed in public. Ali Kathmi Kathm, a teacher in Kufa, said Allawi was the “strong man” Iraq needs. “For so long everything was settled by violence here. Iraqis only understand force,” he said. The British memo warns that “Iraq has no history of democracy, so no one has this habit.”

So what does the future hold? The prewar neocon vision of a prosperous and stable pro-Western democracy in the heart of the Middle East is in tatters. The issue now is salvaging something from the mess. Oddly, what is likely to be salvaged, slowly and painfully, is perhaps the only thing that would have worked in the first place. The state that is evolving is unlikely to be a particularly pleasant — or even pro-Western — one.

Every one of the concessions to the insurgents that are necessary to build a national consensus will take the new Iraq away from the idea imagined by those who launched the war. And any U.S. attempt to interfere will backfire horribly, plunging the country into the total chaos that has so far — just — been avoided. A catastrophic collapse is unlikely. Instead, Iraq is likely to stagger on, amid much bloodshed and pain, into an uncertain, unstable and harsh future.

For ordinary people such as Sahhar there is only one thing to do: “I hope, I hope, I hope. Every day, I hope harder.”

Saturday grim footage apparently showing a British engineer kidnapped from a house in Baghdad last week along with two American colleagues surfaced in a video released in the Iraqi capital. The group holding the three threatened to execute them unless Iraqi women prisoners are released from prison. And Saturday night it was reported that 10 more staff working for an American-Turkish company had been seized as hostages.

There are now fears that Iraqi elections scheduled for January will have to be delayed because of the growing instability.

Last week Geoff Hoon, the British defense secretary, said that more troops could be sent to safeguard the polls if necessary, although Whitehall sources said there was no guarantee that they would be British.

The forthcoming “draw-down” of British troops in Basra had not been made public and is likely to provoke consternation in both Washington and Baghdad. Many in Iraq argue that more, not fewer, troops are needed. Last week British troops in Basra fought fierce battles with Shiite militia groups.

The reduction will take place when the 1st Mechanized Infantry Brigade is replaced by the 4th Armored Division, now based in Germany, in a routine rotation over the next few weeks. Troop numbers are being finalized, but military sources in Iraq and in Whitehall say they are likely to be “substantially less” than the current total in Basra. The new combat brigade will have five or even four battle groups, against its current strength of six battle groups of around 800 men. A military spokesman in Basra confirmed the scaling back of the British commitment.

Currently there are 8,000 British troops in the 14,000-strong “multinational division” in southern Iraq, which has responsibility for about 4.5 million people.

The cuts will occur in the combat elements of the deployment — the 5,000-strong infantry and armored brigade that is committed to the provinces of Basra and Maysan. Four Royal navy ships will remain in the Gulf.

However, the incoming force will leave its heavy armor, mainly Challenger tanks, behind, but will be equipped with a unit of Warrior armored troop carriers.

Senior officers say the scaling back of the British commitment in Iraq is a sign of their success in keeping order and helping reconstruction. But both Basra and Maysan have seen heavy combat recently, with some units sustaining up to 35 percent casualties, and remains restive. The al-Mahdi army, which was responsible for most of the fighting, remains heavily armed.

“Whatever they say, fewer troops mean less capability,” a military expert told the Observer . “You need as many boots on the ground as you can get for low-intensity warfare and peacekeeping operations.”

Iyad Allawi, the interim Iraqi prime minister, will hold talks with Tony Blair at Chequers, Blair’s country estate, Sunday on security issues, including elections and the strengthening of border patrols.

News of the troop withdrawal comes at a difficult time for Blair, with the publication Saturday of leaked documents suggesting that he was warned a year before the Iraq invasion that it could prompt a meltdown.

However, Tessa Jowell, the culture secretary and a close ally of Blair, told the Observer that the prime minister still believed that Britain’s actions would be justified by the restoration of democracy, “however difficult and remote a prospect that seems at the moment, when our headlines are crowded with further attacks by the insurgents.”

In another embarrassment for Blair, a draft report from the Iraqi Survey Group, set up to investigate Saddam Hussein’s weapons program, has concluded that the former dictator’s only chemical or biological armament was a small amount of poison for use in political killings.

Last week he sat in a Baghdad hotel speaking to the Observer. A chubby man in his thirties with a shaven head, a brown sports shirt, slacks and a belt with a cheap fake-branded buckle, he gave a chilling account of his life fighting “the occupation.” He talked for more than three hours and revealed: