By Suadad al-Salhy and Waleed Ibrahim
BAGHDAD (Reuters) - Political infighting and last-minute power-plays delayed the formation of a government on Monday, dashing the hopes of Iraqis and outside investors who want stability to rebuild the nation after painful 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.
Maliki's cabinet is expected to retain Oil Minister Hussain al-Shahristani, the Shi'ite architect of ambitious plans to turn Iraq into a top global oil producer, as well as Foreign Minister Hoshiyar Zebari, a Kurd.
Shahristani's reappointment is important to assure investors Iraq will honour deals to develop its vast oil reserves and return prosperity to a wounded nation.
Maliki's spokesman Ali al-Dabbagh had said earlier the premier would announce "half the new government," even if there was no agreement on the entire team.
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 keen to 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 had said, adding:
"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 garner enough support to secure the premiership but has said he will also join the government as head of a new national strategic policy council.
Allawi's decision, announced 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 Peter Millership)
