LONDON, Oct. 8 (Xinhua) -- The U.S. administration may recommend an establishment of a federation in Iraq with three highly autonomous regions, according to the Sunday Times report.

    The paper reported that an independent commission set up by U.S. Congress with the approval of President George Bush may recommend carving up Iraq into the Shi'ite, Sunni and Kurdish highly autonomous regions.

    The Iraq Study Group, co-chaired by James Baker, the former U.S. Secretary of State during the first Gulf War in 1991, is preparing to report after next month's congressional elections. Baker, 76, an old Bush family friend, said last week that he met the president frequently to discuss "policy and personnel".

    "The Kurds already effectively have their own area," said a source close to the group. "The federalization of Iraq is going to take place one way or another. The challenge for the Iraqis is how to work that through."

    Baker's group will not advise "partition", but is believed to favor a division of the country that will devolve power and security to the regions, leaving a skeletal national government in Baghdad in charge of foreign affairs, border protection and the distribution of oil revenue, the Sunday Times reported.

    The Iraqi government will be encouraged to hold a constitutional conference paving the way for greater devolution, the paper said. Iran and Syria will be urged to back a regional settlement that could be brokered at an international conference. Enditem