-- It wasn't the desperate flight of helicopters from the roof of the U.S. Embassy in Saigon in 1975. But it certainly wasn't a stately and ceremonious retreat of empire like the British handover of Hong Kong in 1997 either.

Yesterday's shift of authority to Iraq was, like so much else in the U.S.-led occupation of Iraq, a surprise -- apparently driven by the deteriorating security situation. With the world awaiting some sort of grand farewell tomorrow, U.S. occupation chief L. Paul Bremer agreed instead to a low-key transfer of legal documents yesterday morning in the fortified Green Zone and departed Baghdad a few hours later.

The all-but-invisible ceremony couldn't disguise the fact that Iraq has confounded the grand strategy of transformation that led the Bush administration to invade the country 15 months ago. The handover leaves a fragile, chaotic Iraq whose old institutions of security were broken by the U.S.-led invasion but whose new security forces aren't yet fully ready to take control.

The new Iraq may eventually prove a success, if interim Prime Minister Ayad Allawi can stay alive and implement his strategy for rebuilding the Iraqi army and stabilizing the country, with U.S. military help. Allawi made a strong start yesterday, but if his government can't contain the violence, Iraq may collapse into warlordism and de facto partition. Either way, it will be an Iraqi affair, not an American one, and it will be shaped by the desires and demands of the Iraqis themselves.

The Iraq war leaves a splintered Atlantic Alliance whose continuing frictions have been obvious beneath the photo-opportunity smiles at the NATO summit here. NATO has agreed to train Iraqi forces, but whether that's a real commitment or a token one remains to be seen. The invasion also helped spawn a wave of anti-Americanism in the Islamic Middle East and around the world. Bremer's departure from Baghdad yesterday may ease those divisions, but the damage to America's reputation is significant. In Europe and Asia, as much as in the Arab world, the United States is seen as the god that failed.

As with any policy reversal, the essential question is whether its architects have learned from their mistakes. The Bush administration may hope that Iraq will be less on voters' minds by November, but with more than 130,000 U.S. troops remaining there, it should remain a big campaign issue.

How President Bush handles the reality of an Iraq policy gone wrong will be a test of the man. If he repeats the "Mission Accomplished" rhetoric of a year ago, it will reinforce the impression that Iraq has been a tissue of lies, from the original justification of the war as a hunt for Iraqi weapons of mass destruction to the final accounting.

But Bush, who speaks often about the nature of leadership, now has a chance to show it in a different way. It's not a question of confessing failure -- something it's hard to imagine Bush doing, temperamentally. Instead, it's a question of showing the country that he has learned from this searing experience and that his own presidency will be different because of the lessons learned.

The political challenge will be to show the country that a second Bush term would be different from the first. This is not an administration that can credibly run on the slogan "Four More Years." So Bush will have to make clear that his conduct of foreign policy over the next four years would be better and wiser. That shouldn't be impossible: Over the past three months, Bush has quietly revamped his Iraq policy from the old "Field of Dreams" hope of transformation to a pragmatic and sometimes cold-blooded art of the possible. Bush should own up to this new realism on Iraq, and the change of course it represents, rather than continue with his moralizing rhetoric.

The American people may decide, looking at the mistakes and misstatements that have surrounded Iraq policy, that the best person to pick up the pieces is Bush's rival, John Kerry. To be convincing, Kerry needs to avoid a petty blame game over Iraq and instead lay out a broad strategy for repairing the damage to U.S. interests. He, as much as Bush, needs to show that he has learned from the mistakes made in Iraq.

What's dangerous about yesterday's hasty handover is that, to the extent it appears a defeat for U.S. power, it will boost Osama bin Laden and other Islamic terrorists. Bin Laden argued in his 1996 declaration of war that if you hit the United States hard, it will buckle. It's as important as ever to show that bin Laden was wrong. If a humbled America looks like a paper tiger after yesterday's end of occupation, the world will only get more dangerous.