BAGHDAD (Reuters) - Iraq is being buffeted by both sides in the civil war raging across its border in Syria and Baghdad's official policy of neutrality is at risk as the conflict spirals into a region-wide proxy war, its foreign minister said.
After two years of fighting that has killed more than 93,000 people, Syria's turmoil is dragging its neighbors into a deadly confrontation between Shi'ite Iran supporting President Bashar al-Assad and Sunni Arab Gulf nations backing Syrian rebels.
In Iraq, there had been a sharp spike in sectarian attacks in Shi'ite and Sunni neighborhoods, putting renewed strain on its own fragile ethnic and confessional make-up, with a Shi'ite majority and disaffected Sunni Arab and Kurdish minorities.
Iraq's Shi'ite dominated government says it supports no side in the war, calling for a negotiated settlement. Western powers say the government allows Iranian flights carrying weapons to Assad's forces through Iraqi airspace, a charge Baghdad denies.
"We are doing our best to maintain a neutral position, but the pressures are enormous and for how long we can hold really is a matter of further developments in Syria," Foreign Minister Hoshyar Zebari told Reuters in an interview this week.
As Syria's conflict becomes increasingly sectarian, Sunni al Qaeda fighters from Iraq are joining Islamist rebels in Syria and Shi'ite militias who once fought alongside U.S. troops in Iraq are crossing over the border to support Assad's forces.
Washington said last week it would start funneling military support to the Syrian rebels after thousands of Shi'ite militants from Lebanon's Hezbollah helped Syrian government forces secure important military gains.
"Iraq is in the most difficult position in this regional turmoil and the conflict in Syria has become a regional conflict by all standards," Zebari said in Baghdad.
Earlier in the Syrian conflict, Iraq rejected calls from other Arab nations for Assad to step down, taking a more muted approach on the growing violence across its eastern border. It abstained from an Arab League vote to suspend Syria and resisted calls for sanctions against its neighbor.
While Iraq's Shi'ite leaders have in the past been hostile to Assad's rule, privately they acknowledge that they fear a collapse of Syria will fragment Iraq along sectarian lines and bring to power a hardline Sunni rule hostile to Baghdad.
The country's Prime Minister Nuri al-Maliki, a Shi'ite, is close to Iran -- relying on Iranian influence to maintain the unity of his Shi'ite coalition, and once took refuge from former dictator Saddam Hussein in Syria.
But Baghdad has a complex relationship with Damascus, which once allowed Sunni fighters to slip across its borders to bomb American and Iraqi troops at the height of the war that followed the U.S.-led invasion of 2003.
U.S. and European officials say Iraq is not doing enough to stop Iran using its airspace to ferry arms to aid Assad.
Asked about this, and the movement of Iraqi Shi'ite fighters across the border, Zebari said: "From our knowledge of the dynamics of the Syrian conflict, we have taken a more cautious position. Not for any love for the regime ... but out of serious concerns for Iraqi national interests."
Some hardline Iraqi Sunni leaders hope the potential rise of a Sunni government in Damascus will bolster their own struggle for more power against Iraq's Shi'ite leadership, which they say has sidelined them since the toppling of Saddam Hussein in 2003.
Shi'ite militant commanders say the three main Iraqi Shi'ite groups - Mehdi Army, Asaib Ahl al-Haq and Kata'ib Hezbollah - are all sending volunteers to Syria, inflamed by reports Shi'ite religious sites are being desecrated there by some rebel groups.
Estimates put the number of Shi'ite Iraqi fighters in Syria from 600 to more than 1,000 while militia commanders say only that around 50 fighters a week have been crossing the border, but operate on rotations.
"There has been an exaggeration of Iraqi brigades or units fighting in Syria," Zebari said. "Really there has been a limited number of volunteers who have gone there without any sanction or approval or support from the government or the Iraqi regime or the political leaders."
Iran, which has a longtime strategic alliance with Syria and common enmity against Israel and Saddam, has gained greater influence in Baghdad since the toppling of Saddam ended decades of Sunni rule and brought Shi'ite allied groups to power.
Many Iraqi observers fear that if Iran loses its Syrian foothold, the only backyard left for its power play would be Iraq, which would increase pressure on the country enormously.
Divisions between Russian and Western powers have hampered organization of an international peace conference on Syria, and the Syrian opposition itself has struggled to form a united front, complicating efforts by those opposed to Assad to prepare for any transition of power.
"Nobody has any control, on the regime or the opposition, this is what is worrying," Zebari said. "There is no international consensus."
Washington and its allies want Assad to step aside and are moving toward arming the rebels, while Russia has given the Syrian leader diplomatic support as well as weapons.
"Unless there is a serious effort by the international community, and by the (U.N.) Security Council, let's be very honest, to intervene, this will continue for a long time because neither side can win a victory," Zebari said.
Editing by Philippa Fletcher