updated 7:49 p.m. ET Aug. 25, 2004

BAGHDAD, Iraq - In this downtrodden country, where the only thing that can be counted on is a daily dose of dark news, Iraq’s scrappy Olympic soccer team interrupted the daily blues with a string of improbable victories.

But on Wednesday, Iraq slumped back into the familiar reality of defeat after a batch of fleet-footed Paraguayans toppled the dashing Iraqis 3-1 in Athens.

“What a waste!” yelled Saad Abbas, slapping the couch with his palm as an Iraqi goal shot flew wide of the net.

“It’s a crime!” shouted Saadi al-Asidy, throwing his arms into the air. “They’re not concentrating in the goal.”

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Despite the loss, Iraq still has a shot at a bronze medal when it plays Italy on Friday.

It was a frustrating night in the faux Moorish lobby lounge of the Palestine Hotel, where a bank of chain-smoking employees hunched around the wide-screen TV. The men bellowed curses as Iraq’s offense, dribbling downfield in their shimmering green uniforms, flubbed shot after shot on the Paraguayans’ goal.

“We’ve always got bad news — explosions, terrorists, bloody things,” Abbas said in a reedy baritone tempered from two hours of smoking and shouting. “We’d like to hear some nice news.”

“We’re looking for a little joy,” added al-Asidy, slumping back as an Iraqi shot landed on top of the net, rather than inside it.

The low point in the match — and in the bar — came late in the second half. Paraguayan player Jose Cardozo, in his red, white and blue uniform, scampered alone down the field and scored an easy goal, the team’s third. The Iraqis had yet to net one of their own.

“Why? Why?” erupted one man, who cursed Iraq’s goalkeeper.

“Don’t blame him, it’s the defense’s fault,” al-Asidy said, pointing out that Iraq’s defenders had been foolishly clumped around Paraguay’s goal in a failed attempt to notch a point of their own.

Al-Asidy rationalized the loss by pointing out that the hastily organized Iraqi team had, until recently, few of the amenities of other Olympic teams.

Not only do the games come during a long guerrilla offensive in Najaf. Just a year ago, Iraq’s soccer federation had been disbanded, the team had no facilities and no cash and the nation had been suspended by the International Olympic Committee.

The IOC reinstated Iraq only in February, giving it time to prepare for the games. It still can’t play on home turf because other nations won’t come here.

Just qualifying for the Olympics was a feat for the Iraqis. But the gritty team beat Portugal, Costa Rica and Australia, converting the Iraqis into the games’ favorite underdog and giving the beleaguered nation a much-needed boost in pride.

Abbas said Iraq’s rebels ought to consider backing their national team instead of sowing chaos.

“In our entire history we’ve never gotten this far,” he said. “It’s a sign that the Iraqi people like to compete with other nations and see the rest of the world.

“We’re a clever people. We just need an opportunity to prove ourselves.”

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