Infighting delays new Iraqi government

BAGHDAD (Reuters) - Infighting and last-minute power-plays delayed the formation of an Iraqi government on Monday, dashing the hopes of local people and outside investors who want stability to rebuild the nation after years of war.

Iraq has been in political limbo since an inconclusive March election and Prime Minister Nuri al-Maliki's plan to unveil his new cabinet before parliament was derailed by squabbling over the division of ministerial posts, lawmakers said.

"There will be no session today (to vote on the cabinet)," parliament speaker Osama al-Nujaifi told reporters.

The final deadline to approve the cabinet is at the end of the week, and the lack of agreement highlights sectarian and ethnic divisions that plague the country, 7-1/2 years after the U.S.-led invasion that toppled Sunni dictator Saddam Hussein.

Senior officials said Maliki's latest list for cabinet posts includes current Oil Minister Hussain al-Shahristani as deputy prime minister for energy, with deputy oil minister Abdul Kareem Luaibi moving up to oil minister.

The list has not yet been presented to parliament.

Shahristani is the mastermind behind major energy deals that could propel Iraq to the status of top global oil producer. He sought and received assurances that he would have enough power as deputy premier to influence the country's energy affairs, a senior official said.

Maliki was expected to hand his cabinet list to the speaker of parliament on Monday.

The ministerial nominees need parliamentary approval, and some lawmakers vowed to reject any vote until the full cabinet was finalised and the horse-trading over.

"We will not vote for an incomplete government," said Amir al-Kinani, a Shi'ite lawmaker of the bloc loyal to anti-American cleric Moqtada al-Sadr.

Shadi Hamid, director of research at the Brookings Doha Centre, said Monday's delay was not surprising.

"National unity agreements are difficult even in the best of circumstances but these are far from the best of circumstances," he said. "This is really an elaborate, high-wire balancing act."

LONGING FOR STABILITY

Iraqis, as well as foreign investors who want to help develop the oil reserves and rebuild the nation's war-ravaged infrastructure, are keen to see agreement on a new cabinet which they say would be a sign of returning political stability.

Ibrahim al-Sumaidaie, an Iraqi political analyst, said the wrangling was an attempt by political parties to wrest concessions on important ministerial appointments from Maliki.

"There are blocs that want to squeeze Maliki to make him respond to their demands," he said. "But Maliki can turn the tables on them and can go to parliament with half of the cabinet -- taking into consideration that he can ensure a majority in the assembly."

Lawmakers said sticking points included the finance ministry post, the vice presidents and the deputy prime ministers. They said sensitive posts, including the interior, defence and national security ministers, were also undecided.

A power-sharing deal last month between Shi'ite, Sunni and Kurdish blocs put Maliki on track for a second term as prime minister. The November 10 pact returned Kurd Jalal Talabani to the presidency and made Nujaifi, a Sunni, parliament's speaker.

Former Prime Minister Iyad Allawi, a secular Shi'ite whose cross-sectarian coalition won the most seats in the March 7 vote, was unable to gather enough support to secure the premiership. However, he has said he will also join the government as head of a new national strategic policy council.

Allawi's decision, announced on Sunday after weeks of wavering, could soothe worries about renewed sectarian violence.

Iraq is seeking to rebuild damaged and neglected infrastructure after decades of war and sanctions. It relies on oil for 95 percent of federal revenues and has set out ambitious targets to boost output capacity to 12 million barrels per day (bpd) over the next six or seven years from 2.5 million today.

(Additional reporting by Muhanad Mohammed, Ahmed Rasheed and Aseel Kami; writing by Caroline Drees; editing by Jim Loney and David Stamp)