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Mr. Lowry,
You made an excellent observation on the readiness levels of Iraqi units; a “2″ or “3″ generally means they are capable of carrying out some portion of their assigned mission. A “2″ would represent a fairly substantial capability.
Likewise, we should keep in mind that this rating system reflects our (US) standards applied to Iraqi units. Many other militaries would consider meeting the expectations we set for a “2″ as completely combat-worthy, if not something worthy of elite status. There are more than a few European armies, for example, that would find a significant number of their units drawing a “2″ or “3″ if their readiness level was measured according to US standards, but nevertheless consider them mission ready.