Iraq faces dangerous political vacuum after vote

BAGHDAD (Reuters) - Iraq is likely to enter a dangerous political vacuum after parliamentary elections in March, with protracted negotiations over a new government threatening the country's fragile peace and shaky institutions.

A decisive win for Prime Minister Nuri al-Maliki, or an opponent, would be welcomed by investors hoping to follow through on deals to tap Iraq's huge oil reserves, but months of political horse trading seems more likely.

"I think we will be very lucky if a new government is in place this side of the summer," said analyst Reidar Visser of www.historiae.org.

Iraq cannot afford to wait too long for a new government.

Its institutions, most rebuilt since the 2003 U.S. invasion, are weak. The security forces struggle to prevent attacks, yet the U.S. military is expected to speed up its drawdown after the March 7 vote in time for a full withdrawal by the end of 2011.

Months of wrangling over who should be prime minister after national polls in 2005 delayed the building of Iraqi security forces and other institutions, which could have helped to curb the sectarian slaughter in subsequent years.

"I would expect a political vacuum, perhaps for weeks or months. The country won't have a government or prime minister," said Peter Harling, analyst at the International Crisis Group.

Iraq's constitution gives the outgoing government full clout until a new administration is finalized, but there is little doubt politicians' attention will focus on the election's aftermath and not on the business of governance and lawmaking.

"If indeed Iraq survives this extremely difficult year, I would become extremely optimistic for its future, but there is a real risk of the contrary, that things will unravel," said Harling.

OIL DEALS SEEN AS SAFE

A lack of obvious post-election alliances due to Iraq's notoriously fluid politics is adding to the uncertainty, along with questions over whether multi-billion dollar oil deals signed by Maliki's government would survive any big change in his political fortunes.

"The oil deals signed by the government are likely to hold because the profit rate for the foreign companies is very low and few doubt these deals are beneficial to Iraq," Visser said.

Maliki's coalition is not expected to repeat its triumphant performance in last year's local polls. Huge bomb attacks have since chipped away at his claims to have improved security, and powerful opponents have united to oust him.

But he still has a strong campaign network, and is an easily recognizable candidate in a sea of largely unknown contenders.

"If Maliki's vote isn't as big as he hopes and isn't a knock out blow, then we're in for a lot of negotiation," said Toby Dodge, analyst at Queen Mary, University of London.

Iraq's minority Kurds, seen as political kingmakers, are likely to demand concessions on issues such as the oil producing city of Kirkuk, which they want to annex as capital of their semi-autonomous region.

That dispute, and others including a row with Baghdad over the legality of Kurdish oil contracts, have hamstrung parliament in recent years and raised tensions, making their quick resolution as part of a deal to form a new government unlikely.

Talks on a deal with other big political blocs, whether Shi'ite or Sunni Muslim, are also likely to be rancorous and long.

Among the majority Shi'ites, two of Iraq's most powerful groups, the Supreme Islamic Iraqi Council and followers of cleric Moqtada al-Sadr, have banded together for the election with little in common apart from a desire to reduce Maliki's power.

His apparent support for banning from the polls candidates accused of links to Saddam Hussein's outlawed Sunni-dominated Baath party has fanned Sunni accusations of sectarianism.

(Editing by Michael Christie/David Stamp)