“The problem is that the Americans have no vision and no clear policy on how to go about in Iraq,” said Allawi, a long-time ally of Washington.

In an interview with The Sunday Times last week as he visited Amman, the Jordanian capital, he said: “The policy should be of building national unity in Iraq. Without this we will most certainly slip into a civil war. We are practically in stage one of a civil war as we speak.”

Allawi, a secular Shi’ite, said that Iraq had collapsed as a state and needed to be rebuilt. The only way forward, he said, was through “national unity, the building of institutions, the economy and a firm but peaceful foreign relation policy”. Unless these criteria were satisfied, “the country will deteriorate”.

Allawi’s concern comes amid signs of growing violence between Shi’ites, who make up 60% of Iraq’s estimated 26m people, and the Sunni minority who dominated the upper reaches of the civilian bureaucracy and officer corps under Saddam Hussein.

The Shi’ites, who endured decades of oppression, are threatening to purge members of Saddam’s former Ba’ath party from the army and the intelligence services, a move that would provoke fierce retaliation from the Sunnis.

Since the execution-style killings of 34 men whose bound and blindfolded bodies were found in three predominantly Shi’ite areas of Baghdad in May, other tit-for-tat murders have followed, with clerics among the targets.

Tension has increased in the past two weeks following the return of Abu Musab al- Zarqawi, the Jordanian-born head of Al-Qaeda in Iraq. Zarqawi left the country in May to seek medical treatment for a chest wound suffered in an American airstrike, but has now recovered sufficiently to resume his activities.

Earlier this month he claimed that his supporters had killed Sheikh Kamaleddin al-Ghuraifi, a senior aide to Iraq’s most influential Shi’ite cleric, Grand Ayatollah Ali al-Sistani.

Zarqawi has now released an audiotape in which he announces the formation of a new militant unit, the Omar Corps. Its avowed aim is to “eradicate” the Badr brigade, the armed wing of the Supreme Council for the Islamic Revolution in Iraq, the country’s largest Shi’ite political party, which has targeted Sunnis.

Allawi, who became head of the interim government council created after the American-led invasion of Iraq in 2003, said it was imperative that the security services and military be rebuilt. He has been a staunch critic of the policy followed by Paul Bremer, the American former head of the Coalition Provisional Authority, of removing former Ba’athists from positions of power and disbanding Saddam’s army without putting anything else in place.

Allawi said that he had discussed the urgency of rebuilding Iraq’s military with President George W Bush and Donald Rumsfeld, the defence secretary, last year. “Bush earmarked $5.7 billion (£3.2 billion) . . . but I did not receive the money,” Allawi said.

His experience as prime minister had taught him that “force alone will not solve the problems in Iraq”. It needed to be combined with dialogue and money to ensure stability.

However, Allawi insisted the Americans’ presence in Iraq was still required and rejected suggestions that a schedule should be drawn up for their withdrawal. “I cannot see withdrawal based on timing, but based on conditions,” he said. These would be satisfied only once Iraq “develops the capability to deal with threats”.

During his term Allawi lost the support of Iraq’s secular middle class through failing to fulfil his promise of restoring security and because of alleged corruption.

However, he is preparing for a comeback in elections scheduled for December. His supporters believe he will be helped in part by the increasing impact of Iraqi gunmen and suicide bombers since Ibrahim Jaafari became prime minister in April.

More than 1,400 people have since been killed, and many Iraqis who regarded Allawi as a ruthless leader now speak wistfully of the relative calm enjoyed under his rule.

Allawi is in intense negotiations to create a new multi-ethnic secular coalition before the general election.

“If we don’t build a state we will lose,” Allawi warned. “Not just as Iraq, but the region as a whole and Europe should say goodbye to stability and so should the United States. Iraq will become a breeding ground for terrorists.

“My philosophy in fighting is to isolate the hardcore Islamists. If you isolate them, it will become very easy to smash them or bring them to justice.”

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