By Michael Christie
BAGHDAD, Aug 31 (Reuters) - The U.S. military formally ends combat operations in Iraq on Tuesday, closing what it hopes will have been the bloodiest and costliest chapters of the war launched 7-1/2 years ago by former President George W. Bush.
The milestone, marked by cuts in U.S. troop numbers to below 50,000, allows President Barack Obama to fulfil a pledge to start ending the deeply unpopular war as his fellow Democrats seek to retain control of Congress in elections in November.
Here are some questions and answers on how Iraq might fare as U.S. troops depart:
* How stable is Iraq now?
Iraq is in a precarious state as it starts to chart its own path before a full U.S. withdrawal by end-2011.
Iraqi factions, split by years of bloodshed between majority Shi'ites and once dominant Sunnis, have yet to agree on a new government almost six months after an inconclusive election.
Insurgents tied to al Qaeda continue to launch frequent attacks, spreading an air of peril and sowing doubts about the imperfect democracy bestowed on Iraq by the U.S. invaders.
International oil firms are starting work on large-scale oil projects that could transform Iraq into a wealthy country.
But right now the economy outside the oil sector remains moribund, towering blast walls still line many rubble-strewn streets and most families sweat through the pounding Iraqi summer heat with only a few hours of public electricity.
The fate of the disputed city of Kirkuk, which may spawn a war between the Arabs and Kurds who claim it, is unresolved.
* Is the United States pulling out too early?
In the long run, outsiders cannot impose peace in Iraq. It has to come from an accommodation between its factions.
At some point, U.S. relations with Iraq have to be based on diplomacy and economics, rather than on the physical presence of tens of thousands of heavily armed American soldiers.
Yet many fear the cut in U.S. troop numbers is premature given the parlous state of Iraq's stability and security.
As Washington retreats, grievances between Shi'ites and Sunnis may erupt again, and revenge killings and a struggle for power may rekindle broader violence, although a return to the all-out sectarian slaughter of 2006/07 is unlikely.
Clashes between Iraq's Arab-led army and Kurdish peshmerga have often only been averted by U.S. intervention. The risks increase when U.S. forces thin out.
Political disillusionment may also take Iraq back down a path well-trodden in its own history and that of much of the Arab world -- military coups and dictatorships.
But Iraq's warring communities may only come to terms if forced to deal with each other directly, without the United States acting as referee or interested party, many analysts say.
The U.S. troop presence, for instance, has incubated the territorial ambitions of minority Kurds, long oppressed by Saddam Hussein. Without it, Kurds adopt may adopt more pragmatic positions over areas they deem historically theirs and which they want included in their semi-autonomous northern region.
Majority Shi'ites, meanwhile, may become more accommodating of Sunni concerns once American forces leave and can no longer be counted on to help control any violent Sunni reaction.
"Without the U.S., Iraqi political factions may be more willing to make hard compromises, because they will be more afraid of the backlash if they do not," said Juan Cole, a professor of Middle East history at Michigan University.
* Can Iraqi security forces defeat the insurgency?
Even when the U.S. military was at the peak of its power in Iraq, with around 170,000 soldiers bristling with weaponry, it failed to stop suicide bombings by Sunni Islamist insurgents or mortar bomb attacks by Iranian-backed Shi'ite militia.
The newly built Iraqi army cannot be expected to succeed where the U.S. army failed.
The insurgency is, however, a shadow of its former self.
Squeezed out of most of their strongholds when Sunni tribal chiefs turned on them in 2006-07, Iraqi al Qaeda groups have also lost many leaders this year and much public support.
They can carry out devastating assaults that stir unease, but lack the strength to overturn the political system.
In any case, the 50,000 U.S. soldiers remaining for 16 more months constitute a formidable back-up force that could swiftly return to combat if needed.
What Iraq's 660,000-strong police and military cannot do at the moment is defend the borders against external aggression.
Only the first 10 of 140 M1A1 Abrams tanks ordered from the United States have been delivered and Iraq won't get the first of the F-16 fighters it hopes to buy until 2013 at the earliest -- two years after the last U.S. soldier is due to pull out.
The dangers confronting Iraq after U.S. combat operations end have probably been overstated, Eurasia Group analysts David Bender and Greg Priddy wrote in a recent report.
"The bigger question is what will happen at the end of 2011, when all U.S. troops are scheduled to quit Iraq."
* What are the likely hotspots to watch?
The main question right now is who becomes prime minister.
Will a cross-sectarian alliance heavily backed in the March 7 election by Sunni voters get what they feel is a fair share of power or be shut out by the major Shi'ite-led blocs?
Will the next prime minister be strong or have his executive authority whittled down by factional deal-making to the extent that he is unable to contain politically powerful militia?
The violent northern city of Mosul, al Qaeda's last urban stronghold, will test Iraqi police and troops; and how the authorities treat the Sunni militiamen who turned on al Qaeda will be important for any reconciliation process.
In the longer term, relations between Arabs and Kurds will be crucial, not just to peace but also to prosperity. The Kurdish region possibly holds a quarter of Iraq's oil reserves. (Editing by Alistair Lyon)
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