BAGHDAD (Reuters) - Iraq's two big Shi'ite political coalitions, one led by Prime Minister Nuri al-Maliki and one whose leaders have close ties to Iran, agreed on Tuesday on an alliance to form a single bloc in parliament, officials said.
But the two groups have not yet agreed on the contentious issue of a nominee for prime minister, the major stumbling block in talks so far, an official with Maliki's State of Law said.
The announcement, nearly two months after a parliamentary election Iraqis hoped would bring stability after years of war, could signify a breakthrough in stalled negotiations to form the next government amid fears of renewed sectarian violence.
But the union of Maliki's State of Law, which took 89 seats in the March 7 parliamentary election, and the Iraqi National Alliance which won 70, could also heighten tension.
State of Law, a mainly Shi'ite bloc, finished second in the vote, two seats behind the cross-sectarian Iraqiya coalition headed by secularist former Prime Minister Iyad Allawi, who was supported strongly by minority Sunnis.
Allawi had warned that if the two major Shi'ite blocs joined forces and tried to exclude his coalition from government, there could be a return to violence in Iraq, which was torn by sectarian bloodshed that killed tens of thousands in 2006-07.
Once-dominant Sunnis, marginalized after the 2003 U.S.-led invasion that ousted Saddam Hussein, turned out in force for Allawi and could be angered if his coalition was shunted aside.
The two Shi'ite blocs combined would have close to the 163 seats needed to form a government.
"The agreement was signed by representatives from both coalitions to form a parliamentary bloc ... which will nominate the prime minister," said State of Law official Haider al-Ebadi, who is also a member of Maliki's Dawa Party.
Asked whether the issue of prime minister had been resolved, he said "No, not yet. The new bloc will nominate one candidate."
PRIME MINISTER UNDECIDED
State of Law and INA announced weeks ago that they intended to form an alliance that would be the largest bloc in the new 325-seat parliament. But their talks had stalled over the issue of prime minister.
Maliki wants a second term but is fiercely opposed by anti-American Shi'ite cleric Moqtada al-Sadr, whose candidates took around 40 of the INA's 70 seats in the election.
Maliki angered Sadr, who is currently studying in Iran, by sending government troops backed by U.S. forces to crush the cleric's Mehdi Army militia in 2008.
The INA combines Sadr's political movement and the Supreme Islamic Iraqi Council (ISCI). Both have close ties to Tehran.
Diplomats said the agreement appeared preliminary given the dispute over a nominee for prime minister. "This is a pre-nup, this is not a marriage," a senior Western official said.
The agreement came a day after election workers began a manual recount of about 2.5 million ballots cast in Baghdad.
(Writing by Jim Loney; editing by Tim Pearce)