FALLUJA, Iraq (Reuters) - Soldiers of the old Iraqi army led by one of Saddam Hussein (news - web sites)'s generals patrolled Falluja on Saturday, a year after George W. Bush declared "mission accomplished" in ousting the Iraqi regime.
Cries of "victory over the Americans" echoed from minarets and gunmen celebrated in the streets under the green banner of Islam and Saddam-era Iraqi flags. Thousands who had fled a month of heavy fighting streamed back to their homes after U.S. Marines pulled back from their siege positions.
Mired in a confrontation that spilled blood on both sides and outraged Iraqi and Arab opinion, U.S. commanders withdrew to more distant positions on Friday. Security was entrusted to police and a new force of ex-soldiers under General Jasim Mohamed Saleh, formerly of Saddam's feared Republican Guard.
U.S. officers said their troops were still ready to storm the city if needed but Marine commander Lieutenant-General James Conway said Saleh's 1st Battalion of the Falluja Brigade would tackle the insurgents and the foreign fighters aiding them.
"They have a plan," he said at a base just outside the city. "They understand our view that these people must be killed or captured. They have not flinched and their commander has said as much to his assembly of officers within the last 36 hours."
Saleh's offer came just in time, said Conway, who conceded some in his new force may have fought the Marines over the past month. "It got to the point that we thought there were no options that would preclude an attack," he said.
But some Iraqis, impatient with an occupation that brought them pictures this week of U.S. and British troops abusing detainees, see a military debacle.
"The city's defenders are celebrating," yelled one man as a group of gunmen in civilian clothes raised green banners and rifles aloft on a street to acclaim the "defeat" of the Marines.
A uniformed member of Saleh's 1,000-strong force, looked on.
On foot and in civilian four-wheel-drive vehicles, Saleh's men patrolled the city, which was once loudly loyal to Saddam.
"EYES WIDE OPEN"
Americans, deciding whether to re-elect President Bush (news - web sites) in November, may also wonder where the Iraq (news - web sites) venture is taking them after the bloodiest month for U.S. troops since the war began.
Bush, in his weekly radio address, said that despite "the serious and continuing challenges," Iraqi life was improving.
"Life for the Iraqi people is a world away from the cruelty and corruption of Saddam's regime," he said.
A Pentagon (news - web sites) spokesman said the United States was going into the Falluja deal with its "eyes wide open," aware of the risks of dealing with the relatively unknown Saleh, whose influence over -- or indeed links with -- the insurgents are unclear.
Marine commanders say they are playing the new arrangement in Falluja by ear and may return to the city. They are still hunting the killers of four American security guards, images of whose mutilated bodies prompted the U.S. offensive a month ago.
Hammad Makhlas, returning to Falluja with his wife and five children to find windows smashed and walls damaged at his home, said: "Praise God. The most important thing is that the town's dignity has been preserved with the defeat of the Americans."
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