Brutal reminders that peace in Iraq is far from assured

The stabbing was sudden and fierce, a man in the crowd lunging forward with a knife, thrust into the neck of a member of the Iraqi military.

After a stunned moment the soldier's comrades opened fire, cutting down the attacker. Round after round echoed through the streets scattering the crowd, parents snatching screaming toddlers into their arms, troops crouching around Humvees in full throttle.

The violent scene which played out in Basra on Tuesday night was for some of us who witnessed it a brutal reminder of the vicious conflict which has cost so many lives since the US-led invasion of Iraq in 2003 and the launch of one of the most emotive and controversial wars in recent British history.

The attack in Hayaniyah district was not, however, a sign that Basra had slid back into its darkest, bloodiest days. What it did show, however, (just as yesterday's bombings in Baghdad did, which killed 41) was that on the eve of Britain's final withdrawal from Iraq, very real problems remain in this fractured and traumatised society.

The Hayaniyah "incident" took place during one of the last patrols carried out by UK forces in Basra City. The troops were on the ground alongside their Iraqi counterparts who will now formally take over security for the region. Also there were a few Americans, about 5,000 of whom will be replacing the last 3,800 British soldiers whose long convoys have begun to disappear into the desert.

The man who carried out the stabbing had, according to Iraqis present, been shouting that he would kill an American. Hayaniyah was a stronghold of the radical cleric Moqtada al-Sadr's Mehdi Army, the scene of frequent ambushes of British patrols and the launching pad for mortar and rocket attacks on the British headquarters at the airport.

It was hard to gauge, in the confusion and panic, the immediate significance of the attack. Yesterday I went back to the area to be told that the 36-year-old assailant had not had a job for 12 years and most of his family were unemployed, like 60 per cent of the male population of the area, and had loose connections in the past with the Shia militias. At the Services' Hospital, where he was treated for bullet wounds, medical staff said they did not know whether he was "crazy" as the soldiers had claimed.

There is little doubt that a lot has changed for the better in Basra since the time when militias imposed their harsh Islamist rule in the city.

A year ago I could only travel around the city with extreme caution and then it was to hear people tell me how the unforgiving regime of the Mehdi Army had added to the other hardships they faced. A hundred women a year were murdered in so-called honour killings while random Sunnis and Christians were executed by Shia paramilitary death squads, often working with corrupt policemen.

Reporting was dangerous. Nour al-Khal, a journalist with whom I worked, and Stephen Vincent, an American reporter, were taken away at gunpoint by men in police uniforms and shot. Vincent died, al-Khal, who was dumped on a roadside, survived and has since fled the country.

The militias were eventually driven out in Operation Charge of the Knights, an offensive begun by the Iraqi army on the orders of the Prime Minister, Nour al-Maliki, and finished with American and British help after the government troops found themselves outgunned by the Mehdi Army.

The British have faced criticism from many quarters, including some American officials, for not being tough enough with the militias, allowing them to take over in Basra, freeing prisoners in the hope of establishing truces. British officials and military commanders robustly deny this.

The departure of the militias has led to a degree of vibrancy in Basra. The floating restaurants moored off the Corniche do a brisk trade late into the evening, gleaming new shopping malls are springing up and the airport has re-opened to international flights.

Having given up its military role in Iraq, the British government is now the leading proponent of promoting Iraq's commerce and industry. As the British officially withdraw from Basra, almost the entire Iraqi cabinet will arrive in London for a trade conference.

At Al-Khaima shopping centre, Um Hussain 27, and Um Ali, 30, described how they had stayed indoors for months during the period when the militias were carrying out their murderous campaign against women.

Their friends Lekah and Shaima both just 20, were killed. "They said they were immodest, they had been influenced by the West. A man in a mask shot them" recalled Um Ali.

"We knew that was not the case. They were young, they wanted to get married, but they did not get the chance. Things are much better now, I only wish they had lived to see this."

The fear of violence returning haunts many in this new Basra. Salam Ghaza Haroun, who runs a clothes store, acknowledged: "Business has been good and at the moment I am getting lots of customers. We thank the British for helping to get rid of Saddam and they did try to understand our way of life. But they should have confronted the militias more. Most of us believe there will be big trouble in the future. There are still men with guns around and this is a big problem."

Basra by numbers

£744m UK spend on reconstruction in Iraq

11 Murders in Basra in January this year. In all of 2007 there were 848

17% Unemployment rate in the city