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CNN's Michael Ware says the Quran incident could have become a crisis.

BAGHDAD, Iraq (CNN) -- What the Iraqi fighter found threatened America's vital alliance with Sunni militia.

A week ago in a police station shooting range on Baghdad's western outskirts, the American-allied Iraqi militiaman found what one or more GIs had been using for target practice -- a copy of the Quran, Islam's holy book.

Riddled with bullets, the rounds piercing deep into the thick volume, the pages were shredded. Turning the holy book in his hands, the man found two handwritten English words, scrawled in pen. "F*** yeah."

The discovery was incendiary. It was an affront to Islam and a serious challenge to the religious credentials of the U.S-allied militias, or Awakening Councils, who turned on al-Qaeda and are now on the U.S. government payroll. Watch villagers protest the incident »

Largely moderate Sunnis, the American-backed militias face constant accusations from Islamic groups that they have turned against Islam to support the cause of the infidels, or nonbelievers. If this indignity had gone unanswered, the Islamists' case would have been won.

Abdullah, the militiaman who found the defaced Quran, complained to his superiors. Soon, there was outrage among the tribes and population of Radhwaniya, a semi-rural area long home to loyalists of the former regime of Saddam Hussein.

Word of what the Americans had done rippled throughout the district and the fury spread. Honor was at stake, and the urge for a violent response against the insult was strong. However, tribal leaders made an approach to American commanders in the region. "Honestly, we have to defend our religion," said Sheikh Saad al-Falahi, "and relations [with the U.S.] would deteriorate if they did not apologize."

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Having fought and then negotiated so hard and for so long to quiet the insurgency in Radhwaniya, American commanders were wary of the potential crisis.

The U.S. 4th Infantry Division is posted in Baghdad and surrounds; many of its commanders and soldiers are veterans of the Iraq campaign. Col. Ted Martin, commander of the Division's 1st Brigade, immediately launched an investigation, promising the tribal leaders a swift outcome.

Investigators soon identified the Army section that had been at the police station's small arms range, and a staff sergeant, a sniper section leader from the 64th Armor Regiment, was the primary suspect. After denying involvement, the sergeant eventually confessed, though he claimed he had no idea the book used for target practice was a Quran. Martin dismissed the excuse.

On Saturday, about a week after the incident (locals say the shooting practice was on May 9, U.S. forces say the Quran was discovered May 11), CNN was present for the showdown in Radwaniyeh as the Americans faced the tribes.

U.S. commanders arrived at a police outpost in heavily armored vehicles to be met by a human tempest; hundreds of chanting tribesmen lined up behind razor wire, offering their blood and souls in sacrifice for the Quran.

A former college quarterback, Maj. Gen. Jeffery Hammond, commander of the 4th Infantry Division, stood facing the angry crowd. His face was grim and fixed as tribal sheikhs swirled around him.

"I am a man of honor, I am a man of character. You have my word, this will never happen again," the general told the angry crowd through loudspeakers, pounding the makeshift podium three times with his fist.

"In the most humble manner, I look in to your eyes today and I say, please forgive me and my soldiers." The act of his sniper was criminal, he said. "I've come to this land to protect you, to support you...this soldier has lost the honor to serve the United States Army and the people of Iraq here in Baghdad."

Martin stood before the crowd next, opening his address with an Islamic blessing. He announced the sergeant had been relieved of duty with prejudice; reprimanded by the commanding general with a memorandum of record attached to his military record; dismissed from the regiment and redeployed from the brigade.

Holding a new Quran in his hands, he turned to the crowd. "I hope that you'll accept this humble gift." Martin kissed the Quran and touched it to his forehead as he handed it to the tribal elders. The crowd's voice rose, "Yes, yes, to the Quran. No, no, to the devil."

But would it be enough to appease the mood in Radhwaniya? A local sheikh came to the microphone. "In the name of all the sheikhs," he said, "we declare we accept the apology that was submitted."

With hands shaken and sheepish thank-yous made, the general and the colonel returned to their armored convoy. The crisis, it seems, was averted.

The stakes, though, had been high. If accord had not been found, says Sheikh Ayad Abd al-Jabbar, head of the local Support Council, it could have been dire.

"Then surely the situation would have changed in another direction and more tension will have risen up, after all the cooperation with the Americans to restore security."

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