Six months on, little progress in Iraq govt talks

BAGHDAD (Reuters) -Six months after Iraq held an election that many hoped would usher in greater stability and peace, voters like Naseer Challoub are running out of patience with politicians, and also out of faith in democracy.

The March 7 vote produced no clear winner as Iraqis divided their ballots between two main Shi'ite-led blocs, Kurdish parties and a cross-sectarian, secular alliance that promised to look after the interests of minority Sunnis.

Since then, the politicians say they have failed to make clear progress in talks on a coalition government while persistent attacks by insurgents as U.S. troops end combat operations has spread fears of a return to broader violence.

"Now I blame myself for going to vote. I am sure if Iraqis had known the situation would get worse, they would never have gone to vote for any of the parties," said Challoub, a 35-year-old Baghdad clothing shop owner.

Iraq is entering a new phase of uncertainty ahead of a full withdrawal next year by the U.S. forces that invaded the country in 2003 to topple Sunni dictator Saddam Hussein.

The slaughter between once dominant Sunnis and majority Shi'ites propelled into power by Saddam's fall has faded.

But the political impasse has shown how deep the divides remain and raised fears that widespread bloodshed could resume if one of Iraq's communities ends up being excluded from government or denied what it views as its fair share of power.

Attacks by Sunni Islamist insurgents against the army and police are on the rise as they take on security after the U.S. military cut its troops to below 50,000 and refocused its mission on training Iraqis, rather than leading the fight.

On Sunday, an assault on an army base in Baghdad by suicide bombers killed 12, two weeks after a sole suicide bomber killed 57 at the same compound. Assassinations of mid-rank officials and anti-al Qaeda militia leaders are a daily occurrence.

"We were hoping our politicians would be more flexible, that they would unite, compromise and fulfil their election promises. But they have failed to stop Iraqi blood being shed because of their differences," said shopkeeper Duraid Mohammed, 37. "They are responsible for every Iraqi killed."

TWO-SEAT LEAD BUT NO MAJORITY

Former premier Iyad Allawi's Sunni-backed Iraqiya gained a two-seat win over incumbent Prime Minister Nuri al-Maliki's Shi'ite-led State of Law alliance in the March election.

Neither secured the majority needed to govern.

Maliki and Allawi have held coalition negotiations but they have borne little fruit. The two have reached out to other factions but little progress has been made, politicians say.

Allawi told Reuters on Sunday talks were still in the preliminary stages.

"Government formation is still far away," said Qassim al-Araji, a leader of the Badr Organisation and lawmaker of the Iraqi National Alliance, which formed a partnership with State of Law but has refused to back Maliki for a second term.

The political tensions were directly affecting security, said an Iraqiya lawmaker, Kadhim al-Shimmari. "Political tensions are affecting the street and many areas could face sectarian violence, the first being Baghdad," he said.

In the meantime, Iraqis' frustration is growing over the lack of clean water and power. Corruption continues unchecked.

The political wrangling is delaying non-oil investment, desperately needed by a country starved of development through years of war, sanctions and isolation.

Oil firms that signed deals which could boost Iraq's output capacity to Saudi levels of 12 million barrels per day say they are watching the stalemate to see if security becomes affected.

Shi'ite Iran, which exerts considerable influence over many Iraqi Shi'ite leaders, has pushed for Shi'ite unity. But it seems to have had little success in making them toe its line.

Turkey, whose ties with Iraq were long dominated by concerns over the independence aspirations of the countries' minority Kurds but have widened as investment boomed, has also been brokering deals, diplomats say. Saudi Arabia, meanwhile, has sought to defend Sunnis and to contain Iranian influence.

"The crisis ... will continue for a long time because the decisions are not in the hands of Iraqi politicians. The delay in government formation is a struggle of regional countries," Ali al-Turaihi, a 39-year-old government employee, said.

(Additional reporting by Muhanad Mohammed; Writing by Serena Chaudhry; Editing by Michael Christie)

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