Iraq has had two political transitions over the past year, taking steps toward a constitutionally-elected government. Nevertheless, the country faces a violent insurgency that is impeding reconstruction and economic recovery. Immediate challenges are to restore rule of law, establish political legitimacy, and begin to build credible and inclusive institutions. The ability of the Iraqi Transitional Government to include ethnic and religious groups in the political process over the coming months will be important in determining whether a future constitutionally-elected government will improve security and stability, which are preconditions for successful reconstruction.