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Sectarian splits and oil expose Iraq's faultlines

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BAGHDAD, Dec 22 (Reuters) - With U.S. troops gone, can

Iraq withstand the political infighting, sectarian violence and

struggles for land and oil that threaten to pull it apart?

It has been a disastrous few days. Accused by the Shi'ite

prime minister of running death squads, the Sunni vice president

has taken refuge in the Kurdish north, exploiting the central

government's lack of authority in the oil-producing region.

The power-sharing government in Baghdad is in disarray, with

Sunnis reinforced in their suspicions that Shi'ite Prime

Minister Nuri al-Maliki is bent on sidelining them.

And the bombers are back: at least 63 people were killed and

194 wounded on Thursday in more than 10 explosions across

Baghdad, mostly targeting Shi'ite districts.

Iraqi and foreign analysts say talk of the country breaking

up looks premature. But the risks would increase sharply if

there were major and prolonged sectarian violence, and if Iraq's

neighbours, Shi'ite power Iran and Sunni Gulf states, intervened

in support of breakaway movements.

The key question mark is neighbouring Syria: Shi'ite leaders

worry Syria's turmoil will spill over the border, encouraging

protests in the western Sunni provinces, especially if hardline

Sunnis replace President Bashar al-Assad in Damascus.

Maliki's Shi'ite-led government is close to Iran, and the

fall of Tehran's ally Assad could shift the regional power

balance.

"The main danger Iraq faces with Syria is for its unity,"

said a senior Iraqi Shi'ite lawmaker. "Many powers see dividing

Iraq as in their favour. If you encourage provinces on the

borders, it is like cutting the cake. The question of Iraq's

unity is still not resolved."

BACK FROM THE BRINK

Iraq has weathered worse crises: with the help of a U.S.

troop surge, it pulled itself back from the brink of civil war

after intercommunal violence, unleashed by the U.S.-led invasion

in 2003, reached a peak in 2006-7.

Demands for regional power have simmered for years in a

country whose modern borders were drawn up in 1920 by the League

of Nations, pulling Sunnis, Shi'ites, Kurds and Turkmen into a

new nation.

Sunnis suspect Maliki of trying to cement Shi'ite control

after the fall of dictator Saddam Hussein, a Sunni. Those fears

will be compounded by the terrorism charges against Vice

President Tareq al-Hashemi, which he rejects, and by Maliki's

request to parliament to remove the Sunni deputy prime minister,

Saleh al-Mutlaq.

A senior Obama administration official stressed that Iraq's

factions had so far addressed their differences peacefully,

rather than resorting to violence, and dismissed the idea

Maliki's moves were linked to the U.S. troop withdrawal that was

completed on Sunday.

"We actually think they reflect long-standing, unresolved

political dynamics that have caused crisis in the past, even the

recent past, without plunging the country into turmoil," he

said.

But by fleeing to Kurdistan, Hashemi has scratched another

sore - the festering dispute between the Kurds and the central

Baghdad government over territory and oil.

Kurdish sources said tensions with Baghdad were likely to

rise. But they believed the consequences would be much worse -

between Sunnis and Shi'ites and Kurds and Sunnis, especially in

disputed areas - if the fugitive vice president were handed

over and tried in Baghdad.

U.S. troops had acted as a buffer in the north, working on

joint patrols with the Iraqi national army and Kurdish Peshmerga

forces, especially over who controls hotspots like the oil city

of Kirkuk whose oilfields represent nearly a quarter of Iraq's

oil exports or around 460,000 barrels per day.

Rival factions could take advantage of a perceived vacuum to

seek more control of areas that are under dispute.

"These areas in northern Iraq are perhaps...the ones in

which U.S. troops have played their most important role over the

last 1-1/2 years," said Ali al-Saffar, an analyst with the

Economist Intelligence Unit.

"The Kurds have been vocal in their demands to annex some

areas of Diyala and Nineveh. Any Arab backlash would put the

government in an extremely precarious situation."

Ignoring warnings from Baghdad, Kurdistan has pushed ahead

with deals with U.S. oil giant Exxon Mobil, the first

major explorer to test the waters by signing with the regional

government. Baghdad says the deals are illegal.

DIFFICULT BALANCE

For Maliki, it is a tricky balance. Taking a hard line with

Exxon risks jeopardising its investments in the south of the

country, but allowing the Kurds to win may encourage demands

from other regions seeking autonomy.

These have increased over the past year, as frustration

rises with a government that has failed to deliver basic

services, electricity and food rations.

Iraq's constitution allows provinces to seek more autonomy

and control over their finances, subject to a public referendum

and parliamentary approval.

Southern oil-hub Basra presented its demand more than a year

ago. Now provincial officials are trying to cancel a $17 billion

Shell gas deal as a way to break away from the control

of the central government and solve its shortages of housing and

power.

Such a move could erode Baghdad's control over revenues from

major oilfields in the predominantly Shi'ite south, where Iran's

influence is stronger.

"Baghdad and the government there do not

know what is happening in Basra - there are no

services here," Hussein Faydh, a civil servant. "We have all the

oil and we have nothing in return."

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