BAGHDAD, 29 August 2004 — Having returned from his sick bed to broker a peace deal freeing Najaf’s sacred mosque of rebel fighters, the Grand Aytaollah Ali Sistani appears to have grown into an almost larger-than-life figure, the one man who could end the deadly conflict between an upstart cleric and the Iraqi government and its US backers.

In order to win the agreement, the septugenerian Sistani displayed both his moral authority and his ability to rouse a mass movement of supporters literally overnight.

But at the same time that Sistani burnished his image as the pre-eminent Shiite leader in a nation with a Shiite majority, it was rebel Shiite cleric Moqtada Sadr who may have walked away with the best deal: A man accused of being an accessory to murder, Sadr left the mosque with amnesty for any crimes he might have committed, an invitation to join in national politics, and freedom for his militiamen, many of whom remained heavily armed.

Left in a weaker position were interim Iraqi Prime Minister Iyad Allawi, and the US-led military forces that back him. Allawi got no guarantee that Sadr would desist from armed activities other than in Najaf and Kufa, leaving open the possibility that he will remain a thorn in the government’s side.

As for American soldiers, they would leave Najaf under the terms of the deal brokered by Sistani a day after he returned home following three weeks of medical treatment in Britain.

It was the second time in less than three months that the Americans were unable to put a firm end to Sadr and his forces — in June, Sadr agreed to leave the Imam Ali Mosque without a formal deal being struck — and he and his forces later returned. US forces similarly left the Sunni insurgent town of Fallujah during the spring.

The pact brokered by Sistani makes Najaf and neighboring Kufa effectively into another “no go’’ zone for American troops.

Key elements of Sistani’s deal include the requirement that Najaf and Kufa become weapon-free zones and that armed groups there leave and never return; Iraqi police will have responsibility for law enforcement; all foreign troops would leave both of the cities; and the Iraqi government should compensate Najaf residents for damage during the fighting. Sistani also requested that a census be taken before an Iraqi national election — a move designed to hold the Allawi government to its promise to hold a vote early next year.

Although often framed as a face-off between Sadr and the US military, the drama that unfolded on the decimated streets of Najaf during the last three weeks was in essence a public display of internal Shiite politics. What is at stake is the ultimate leadership of Iraq’s Shiite majority.

Sistani, Sadr and Allawi are all Shiites, and each represents a major strain of the dominant religion. Allawi speaks for secularists. Sistani appears to represent a moderate religious element comfortable with a secular government as long as it is sensitive to Shiite interests. Sadr speaks for fundamentalist Shiites whose main platform is opposition to a foreign military or political presence in Iraq.

“This has been all about Shia politics,’’ said a Western diplomat, who worked in Iraq until recently and speaks Arabic. “And, it’s about the authority of the state and that’s still playing out.’’

Far from ending Sadr’s future, the deal brokered by Sistani gave him much of what he wanted — except for the sacred shrine itself, which had served to shield him and his Mehdi Army from the military might of US forces and the interim Iraqi government.

Although Sistani looked Friday like the consummate power broker, he, like Allawi, must still contend with Sadr, who has been willing to threaten him and openly insult his gradualist approach of moving slowly toward elections under the United States’ eye.

Moreover, Allawi and the Americans failed to get what they wanted most: An end to Sadr. In addition, the Americans, who did much of the fighting against Sadr’s Mehdi militia, looked to some as destroyers of the old city of Najaf and killers — usually inadvertently — of civilians as well as of young Sadr militiamen.

Even before day’s end Friday, Sadr’s assistants again were talking tough and gloating about having triumphed.

“There is a victory, a very great victory, because we didn’t hand our weapons to the government or the occupation authorities,’’ said Sheikh Ahmed Shaibani, a key Sadr lieutenant. “The Mehdi Army pulled out from the city, we proved that the Mehdi Army can not be disarmed and will never be disarmed, and this is a victory.’’

“They have been kissing our hands to get us to participate in politics, but competing in an election under occupation is not possible,’’ he added.

While there is considerable resentment of Sadr, particularly among residents of the battered holy cities of Najaf and Karbala, where his armed rebellion has wreaked havoc on the economy by halting traffic from pilgrims, it remains to be seen whether Sistani’s supporters, who are generallly reluctant to speak out against Sadr, will act to restrain him in the months ahead.

Allawi, who has little patience for the Shiite insurgency, found himself torn between his own party, many of whose members also served under the deposed Saddam Hussein, and his coalition government, which includes several Shiites with strong religious ties.

While Allawi and his minister of defense wanted to demolish Sadr and his forces once and for all, they also recognized that in large swaths of Iraq and in the neighboring states of Iran and Syria, both home to large numbers of Shiites, any direct assault on the holy shrine could have had violent repercussions. The deal Sistani crafted allowed Allawi both to avoid damaging the shrine and to avoid putting his troops directly in harm’s way by demanding that they storm the shrine where Sadr’s militiamen were holed up. It also made him appear deferential to clerical authority — a boon to his generally secular image that in the past failed to make him appealing to religious Iraqis.

However, there is no avoiding the reality that the interim Iraqi government is now facing an entrenched insurgency of fundamentalist Shiites.

The initial post-Saddam Hussein insurgency was a Sunni one made up of former Baathists as well as strongly religious Sunnis and foreign fighters.

The Americans, meanwhile, were in the unfortunate position of acting as shock troops for the still ill-prepared interim Iraqi government security forces. Absent from the negotiations, a role the Americans wished to leave to Allawi, they looked to many as exerting a heavy hand and being partially responsible for rampant destruction in the old city of Najaf.

Troops on the ground seemed well aware of the problem Friday.