When Donald Rumsfeld declared that peace could be achieved only by unconditional surrender he revealed a crucial flaw in the Bush administration's thinking about the war in Iraq. With the destruction of Saddam Hussein's regime, there is no authority left in the country with the power to enforce surrender. A modern western police state has been replaced by pre-modern anarchy. Like other failed states such as Afghanistan, postwar Iraq will be the site of unconventional warfare for generations to come.

The reality is that the war has not ended but instead entered a new phase. Iraq's would-be liberators are now the targets of Chechen-style guerrilla resistance from sections of Iraq's diverse and fractious population. At the same time, in the absence of any internationally legitimate alternative, the occupying forces will be expected to keep the peace - a forbiddingly difficult task that is made almost impossible by the lack of the necessary manpower. With Iraq a stateless zone, only British and American forces can ensure a semblance of order; but they have been equipped for a short war and not for the long haul of neocolonial rule that is now the only way of keeping anarchy at bay.

Though it was entirely predictable, the chaos of postwar Iraq figured nowhere in the plans of the ideologues who engineered the war. The neo-cons in the civilian leadership of the Pentagon saw the war as a conflict between states - one of them the world's military mega-power, the other a ramshackle tyranny whose resources had been depleted by 12 years of sanctions and bombing. Self-evidently, there could be only one outcome in such a conflict. But the neo-cons were wildly optimistic about the condition of postwar Iraq. Providing the rudiments of government in such chaos poses almost insoluble difficulties.

It is not only that the occupying forces have no clear mandate in international law and are viewed throughout the Arab world as invaders, but also that the strategic objectives and rules of engagement of the US and British forces are vague or incoherent. Why are they there? Is it to find and dismantle weapons of mass destruction, as Tony Blair kept on telling us right up to the outbreak of war? Is it to replace an unpleasant tyranny by some sort of democracy, as he and President Bush are telling us today? Or is the invasion and occupation of Iraq simply the first in a series of regime changes designed to remake the world in an American image - as several neo-con ideologues with powerful friends in the Bush administration have repeatedly asserted?

These are not just theoretical questions. How they are answered determines how British and US forces treat Iraq's civilian population. The US forces insist that they want to liberate Iraq. Yet the Pentagon's doctrine of "force protection" - which makes saving American lives the paramount consideration in any military operation - requires them to treat all Iraqis as potential enemies. Applying this doctrine, American forces are behaving in Iraq as they did in the Balkans - engaging with ordinary people as little as possible, and then only under the cover of maximum force. The policy can only bolster the perception of the Americans as aggressors.

The British forces are responding far more subtly and effectively. Long experience has taught them that maintaining any kind of order in a semi-anarchic environment such as postwar Iraq demands close and sensitive engagement with the local people. But it is not the British who call the shots. If, as seems likely, the American forces come under persistent and increasing attack from people dressed in civilian clothes, they will inevitably respond by trying to insulate themselves from the population as a whole.

The failure to anticipate the scale and depth of the breakdown of civil order in postwar Iraq was of a piece with the childish unrealism of neoconservative thinking. In much of Europe, the neo-con intellectuals who engineered the war in Iraq are seen as Machiavellians whose evil machinations portend an era of unrestrained American hegemony. The truth is more bizarre - and perhaps more alarming. The true believers at the Pentagon and the White House are not conservatives in any sense that is familiar in Europe. They are callow utopians with scant understanding of the intractable problems of the world they are so eager to remake. The plan of the US deputy secretary of defence Paul Wolfowitz to install American-style democracy throughout the Middle East is not realistic. It is a Messianic fantasy, whose principal enduring result will be to weaken America's remaining allies in the region, such as Jordan and Egypt.

Far from entrenching US hegemony, the effect of neo-con policies is to undermine it. The media spectacle of American firepower laying waste to sections of Baghdad has not diminished the loathing in which the US is held throughout the Arab world. Instead the overpowering superiority of the US in high-tech warfare is increasing the appeal of terrorism. There is a dark irony in the rise of suicide bombing in Iraq. Like the Palestinian territories, Iraq has been one of the most secular societies in the Middle East. Now, as a by-product of a war waged with the avowed aim of promoting "western liberal values", a fundamentalist culture of martyrdom is taking hold. How order can be maintained in the country under these conditions is anyone's guess, but - as was anticipated in assessments made by the Pentagon and by the British military many months ago, only to be rejected by Donald Rumsfeld - it is likely to require hundreds of thousands of troops stationed there indefinitely.

Here we have the nub of the dilemma. The neo-cons have embarked on a grandiose project of regime change throughout the Middle East. In any realistic assessment, such a venture would demand a decades-long American military presence and a similar commitment to nation-building - in other words, the establishment of something akin to an American imperium in the region. Plainly, however, the Bush administration has no interest in nation-building, and nothing but contempt for peacekeeping. As Condoleezza Rice remarked only the other day, the American forces are not in Iraq to make sure children get safely to school.

In fact, if America's invasion of Iraq is indeed the first move in establishing some sort of neo-imperial governance in the Middle East, this is exactly the kind of duty that US forces will have to learn to discharge. Yet it is hard to think of any major power so ill- equipped to sustain the burdens of empire. Culturally, the US has little tolerance for a steady flow of body bags. Economically, its capacity to support an imperial role is dubious. If Americans want empire at all, it is on the cheap - without the casualties and the expense.

Given the scale of the quandaries facing the Americans in Iraq, it may seem unthinkable that there are some in the Bush administration who talk about widening the war. Many people in Britain tend to dismiss these voices, arguing that as a pragmatic politician Bush will want to show he is concerned with the health of the US economy and other domestic issues.

I am not so sure. The war has distracted public attention from the US economy's difficulties. It is just possible that it can continue to do so until the presidential election next autumn. An expansion of the war would be consistent with the doctrine of pre-empting threats to American national security, as announced by Bush in Congress in September 2002. Indeed, a shift to a wider war may already be under way. Over the past week or so, al-Qaeda has ceased to be central in White House briefings on the "war against terror". Hamas and Hezbollah are the new targets. In the Middle East this is being read as a clear indication that the policy of regime change will soon be extended to Syria and Iran.

Such a widening of the war would be catastrophically destabilising, and not only for the countries of the Middle East. It would solidify the "anti-American axis", with China and perhaps India lining up behind France, Germany and Russia. In Britain, this near-complete isolation of the US from the rest of the international community would mean greatly increased political risks for Blair. With the fall of Baghdad, the threat to the Prime Minister seemed to vanish, but if Britain were to follow the US into a wider Middle Eastern war it would return with a vengeance.

Even as things stand, Blair's position is not as safe as it looks. He has again staked his future on a pledge on which he cannot deliver. The "road map" to self-determination for the Palestinians prom-ised by Bush is extremely unlikely ever to amount to anything of substance. Given the domestic political risks, it is hard to see what incentive Bush has to carry it through, aside from repaying Blair's loyalty. Cordially detested as he is by some of Bush's closest advisers, Blair may be unwise to rely on the president's gratitude.

Whether or not the war spreads beyond Iraq, it has already altered Britain's place in the world. In the view of some American right-wing commentators, Blair's unblinking support of US policy has had the effect of detaching Britain from the rest of Europe. Britain's future, they argue, lies in the "Anglosphere", an English-speaking union centred on the US. Excluding, as it does, Canada and New Zealand - which have had the good sense to opt out of the Bush administration's military adventures - the Anglosphere is a fatuous notion. Still, the right-wing commentators have a point. Blair's decision to join Bush in prosecuting an unnecessary, quite possibly illegal and certainly criminally stupid war has alienated him deeply and very likely irreversibly from the core countries of Continental Europe. Anyone who thinks that Britain can be "at the heart of Europe" while Blair is Prime Minister has failed to grasp this shift in European attitudes. In present circumstances, any attempt by Blair to join the euro might even be derailed by a veto.

So is Britain bound to drift ever further from the rest of Europe? On the contrary, the long-term impact of war in Iraq could well work the other way. Blair has entangled Britain in a dangerous conflict that has no clear end point. It is a war that serves no British national interest. It is the result of applying a neoconservative world-view in which Blair sincerely believes, but which is detested by the overwhelming majority in his party and viewed with suspicion by most people in the country. Despite the PM's current popularity, these are circumstances that do not augur well for him. If Blair finds his survival once again in question as a result of his support for this war, his difficulties will send a powerful message to the British political class. In its attitudes to war and peace, Britain is a European country. It has no taste for global crusades. When that message sinks in, Britain will begin its drift away from America and into Europe.

John Gray's latest book is Al-Qaeda and What It Means To Be Modern (Faber and Faber)