I remember asking a western intelligence officer in Baghdad, six months after the American invasion, what he would advise the Iranians to do. "Wait," he said with a smile. Iran has done just that. If I were Tehran I would still wait. I would sit back, fold my arms and watch my tormentors sweat. I would watch the panic in Washington and London as body bags pile up, generals mutter mutiny, alliances fall apart and electors cut and run.

As Blair's emissary, Sir Nigel Sheinwald, comes to me cap in hand, I would pour him tea and roar with laughter. I would ask him to repeat to my face the insults and bile his American taskmasters hurl at me daily. I would say with Shylock: "Hath a dog money? Is it possible a cur can lend three thousand ducats? Fair Sir, you spat on me Wednesday last; you spurned me such a day; you called me dog; and for these courtesies I'll lend you thus much moneys?"

As we approach the beginning of the end in Iraq there will be much throat-clearing and breast-beating before reality replaces denial. For the moment, denial still rules. In America last week I was shocked at how unaware even anti-war Americans are (like many Britons) of the depth of the predicament in Iraq. They compare it with Vietnam or the Balkans - but it is not the same. It is total anarchy. All sentences beginning, "What we should now do in Iraq ... " are devoid of meaning. We are in no position to do anything. We have no potency; that is the definition of anarchy.

From all available reports, Iraq south of the Kurdistan border is beyond central authority, a patchwork of ganglands, sheikhdoms and lawlessness. Anbar province and most of the Sunni triangle is controlled by independent Sunni militias. The only safe movement for outsiders is by helicopter at night. Baghdad is like Beirut in 1983, with nightly massacres, roadblocks everywhere and mixed neighbourhoods emptying into safe ones. As yesterday's awful kidnapping shows, even a uniform is a death certificate. As for the cities of the south, control depends on which Shia militia has been able to seize the local police station.

The Iraqi army, such as it is, cannot be deployed outside its local area and is therefore useless for counter-insurgency. There is no central police force. There is no public administration. The Maliki government barely rules the Green Zone in which it is entombed. American troops guard it as they might an outpost of the French Legion in the Sahara. There is no point in patrolling a landscape one cannot control. It merely alienates the population and turns soldiers into targets.

To talk of a collapse into civil war if "we leave" Iraq is to completely misread the chaos into which that country has descended under our rule. It implies a model of order wholly absent on the ground. Foreign soldiers can stay in their bases, but they will no more "prevent civil war" than they can "import democracy". They are relevant only as target practice for insurgents and recruiting sergeants for al-Qaida. The occupation of Iraq has passed from brutality to mere idiocy.

It is possible that a shrewd proconsul, such as America's Zelmay Khalilzad, might induce the warring factions to agree a provisional boundary between their spheres of influence and assign militias to protect it. But my impression is that Iraq has passed beyond even the power of the centre to impose partition. If civil war means armies invading territory, there is no need for that in Iraq. If it means ethnic massacres and refugees fleeing into enclaves, it is there already and in abundance.

The form of the western retreat from Iraq is already taking shape. If all politics is local, none is more local than the politics of anarchy. Britain is already withdrawing from towns such as Amara and bases in Basra, leaving local militias to fight over the territory left behind and regional leaders to try to discipline them. This cannot begin until the troops leave.

American withdrawal will take the same form in the north and west. The chief cause of British and American casualties at present is incoming commanders going on unnecessary patrols to show they can "kick ass".

Next month's Baker/Hamilton inquiry - surely the strangest way an army has ever negotiated its own retreat - will call for a hastening of such "redeployment" away from centres of population to giant bases in the desert. They can stay there to save face as Iraq's factions and provinces reorder themselves messily in the towns and cities. Units can then slip quietly away to Qatar by the month.

It would clearly help Bush and Blair were such a redeployment to be covered by some international conference. But the idea that Ba'athist, Sunni Damascus and clerical, Shia Tehran would jointly guarantee the safety of a power-sharing regime in Baghdad is beyond credence. They might gain regional kudos by attending such a conference, and even by pretending to rein in their co-religionist militias. But any idea that they will stop sponsoring Hizbullah or stop enriching uranium as part of some deal is bizarre. As for Bush promising to "do something" about Israel and Palestine, he promised that in 2003 to no effect. Yes, these leaders would like good relations with the west, but they can survive without them. The axis of evil has done them no harm.

Bush and Blair are men in a hurry, and such men lose wars. If there is a game plan in Tehran it will be to play Iraq long. Why stop the Great Satan when he is driving himself to hell in a handcart? If London and Washington really want help in this part of the world they must start from diplomatic ground zero. They will have to stop the holier-than-thou name-calling and the pretence that they hold any cards. They will have to realise that this war has lost them all leverage in the region. They can insult and sanction and threaten. But there is nothing left for them to "do" but leave. They are no longer the subject of that mighty verb, only its painful object.

simon.jenkins@theguardian.com