BAGHDAD — The decisive battle of the Iraq war is shaping up — not in the streets of Baghdad but in the halls of government where the future of America's role across the region is on the line.

American and Iraqi officials have expressed new resolve to hammer out far-reaching deals that would allow U.S. forces to remain on bases across Iraq once the U.N. mandate expires at year's end.

The stakes in the talks are enormous.

The outcome will shape not just Iraq for years to come — but, more important, America's strategic position all across the oil-rich Persian Gulf at a time when Iran's influence is growing. The U.S. maintains substantial air and naval forces elsewhere in the Gulf but few ground troops except in Iraq.

A pact also would assure Arab allies that Iraq would not fall under domination by Iran, which is pressuring the Iraqis to refuse any deal that keeps U.S. soldiers here.

But critics in the United States fear it will tie the hands of the next president when millions of Americans are eager to bring troops home. Many Iraqi citizens, in turn, worry the deal will allow American domination of their country for decades.

With so much in the balance, the Iraqi government said June 18 that both Washington and Baghdad recognize the need to finish the talks by July's end "to avoid any legal vacuum that may arise."

That came only days after it seemed the deal was dead. But Foreign Minister Hoshyar Zebari said the prospects for an accord had brightened because of new U.S. flexibility after meetings in Washington.

The White House said President Bush and Prime Minister Nouri al-Maliki have affirmed their commitment to completing the deal.

Nevertheless, the two sides remain far apart on core issues, including the number of bases where the United States will have a presence, and U.S. demands for immunity from Iraqi law for American soldiers and contractors.

Other obstacles include U.S. authority to imprison suspects, fight battles without Iraqi permission and control of the country's air space.

Iraq's parliament must sign off on the deal by year's end — and approval is by no means certain.

The U.S. operates scores of bases throughout the country, including the sprawling Camp Victory headquarters in Baghdad, Asad air base in western Iraq and the giant air facility at Balad, a 16-square-mile installation about 60 miles north of the capital that houses tens of thousands of American troops, contractors and U.S. government civilians.

It's still unclear how many of the facilities Washington would want to keep.

If all else fails, the two sides could go back to the U.N. Security Council and seek an extension of the mandate allowing troops in Iraq.