A rumor got loose and gained credence around the world that Saddam Hussein had lost the Persian Gulf war. At this writing, he has not.

True, the American-led coalition drove the Iraqi army out of Kuwait, destroyed much of its fighting capability and did heavy damage to the infrastructure that supported Saddam's war machine.But the Iraqi dictator is unmoved by the death of his soldiers, burning tanks and blasted bridges. His main concern is his own power in Baghdad, which remains intact, as does his ability to do evil.

Most Americans now agree that President Bush halted the ground war against Iraq a day or two early. That mistake allowed a sizable part of the Republican Guard to escape the Basra sector and then to slaughter Shiite and Kurdish insurgents.

It would have been easy for American aircraft to prevent Iraqi helicopters from machine-gunning Saddam's foes and dropping napalm and phosphorous bombs on them. Without Baghdad's control of the skies, the Shiite uprising in the south and the Kurdish rebellion in the north likely would have succeeded.

Unfortunately, Bush listened to the advice of his experts. He was made to fear the "fragmentation" of Iraq and the victory of the Shiites, who then supposedly would make common cause with their co-religionists in Iran, greatly upsetting Saudi Arabia.

In any case, Washington's giving Saddam a free hand has led to tragedy. American soldiers had to stand by and watch helpless Shiite civilians slaughtered near their positions. And Saddam's driving 2 million Kurds out of their homes is a terrible disaster.

In a perverse way, Saddam has lost a battle - in Kuwait - but is close to winning a strategic prize: a northern part of Iraq with oil fields but without troublesome Kurds, who repeatedly revolt against Baghdad's misrule.

And if he gets away with dumping his unwanted Kurds on Turkey and Iran, Saddam will win again. He will have passed a huge refugee problem to neighbors he hates, destabilizing them.

What next? Bush would do well to listen to his ally, President Turgut Ozal of Turkey, who understands the region. Ozal calls for a democratic, federated Iraq, where Sunnis, Shiites and Kurds would run their local affairs and no group would dominate the others.

The U.S. and its allies have the military and political power to produce such a desirable outcome. Only then the rumor that Saddam lost the war would be accurate.