IRAQ'S parliament last week unanimously approved a law paving the way for municipal elections. The main factions agreed to put off the dispute over the status of Kirkuk, Iraq's fifth-largest city, and allow voting in 14 of the nation's 18 provinces.

Left out of the process for now are the three provinces of the Kurdish autonomous region plus oil-rich Kirkuk, where a power-sharing scheme between the majority Kurds and other communities (Arabs, both Shiite and Sunni, and Turkmen) remains to be negotiated.

Immediately after the law passed, the government announced that elections for city and provincial councils would be held on Jan. 31. The law now goes before the country's three-man presidency council, headed by President Jalal Talabani, an ethnic Kurd.

Holding municipal elections is crucial to Iraq's new and still fragile democracy.

To start with, the elections will allow the new leadership that has emerged locally to establish its popular legitimacy. In many provinces, especially the four where Sunni Arabs form a majority, this new generation is determined to challenge the central leadership, which consists mostly of former exiles.

The returning exiles built their popular base top-down. The new generation of leaders has operated in the opposite direction, building support at the grass-roots level before claiming a share of power.

The biggest group likely to benefit from the coming elections is the "Awakening Movement," consisting mostly of former Arab Sunni insurgents who turned against al Qaeda and helped clear terrorists out of Anbar and Salahuddin provinces.

The elections will also provide an opportunity for a massive reshuffling in the Shiite community, which accounts for some 60 percent of the population. Some parties with a large share of power in the central government may lose the provincial bases that they've secured thanks to patronage and other corrupt practices.

The Shiite bloc that won the two previous general elections is now divided - offering voters a wider choice, especially because many candidates with local support will stand as independents.

The elections are also important because they'll create new organs of local government directly responsible to the electorate and thus accountable on a day-to-day basis. Resources the central government now allocates to local authorities are controlled by appointed officials, often promoting sectarian and factional interests.

The creation of elected local government organs paves the way for the full implementation of the decentralization law enacted last year. This will allow the provinces a large measure of autonomy (economic, cultural and social), reflecting Iraq's ethnic and religious diversity.

Sources in Baghdad say local elections in the four remaining provinces will be held at the same time as the parliamentary elections, likely to be fixed for next spring.

Some Western observers had warned that the Kirkuk issue could unravel Iraq's new democracy. That hasn't happened, as Iraqi political leaders have demonstrated their readiness to learn the art of compromise and the virtue of patience.

One reason they appear determined to complete the electoral cycle by next April is their doubts about US policies in the next administration. The Iraqi leaders hope that holding successful local government and parliamentary elections will put them in a stronger position even if they have to deal with a President Barack Obama, who opposed the toppling of Saddam Hussein.

"We want the American people to know that Iraqis understand and like democracy," says an adviser to Prime Minister Nouri al-Maliki. "The toppling of Saddam Hussein gave us a chance to try something different, i.e. democracy, and our people liked it."