Just which civil war are we in the middle of?

Sunni and Shia? Or Pentagon and State Department?

WASHINGTON, May 14 The U.S. Defense and State departments are in a "bureaucratic knife fight" over the best way to revive Iraq ' s economy, a published report said Monday. Pentagon officials said they believe reopening state-run businesses could reduce violence by employing tens of thousands of Iraqis. But State Department officials argue this is antithetical to free-market reforms, The Washington Post reported.

"There has been a surprising degree of venom and hostility" between the departments, a senior U.S. government official involved in Iraq policy told the newspaper. The dispute has become so pitched that Deputy Undersecretary of Defense Paul Brinkley has stopped working with the U.S. Embassy in Iraq and set up his office elsewhere in Baghdad's fortified Green Zone.

"We tend to not deal with them very often," Brinkley said of embassy officials. "We have our own mission, and we do our own thing." Brinkley also told the Post he expected several factories to reopen this summer.

By year's end, he said he envisions Wal-Mart stores selling made-in-Baghdad leather jackets and other U.S. retailers stocking Iraqi loafers, hand-stitched carpets and pinstripe suits, the newspaper said.