Iraq’s new leaders were squaring off tonight for weeks of political bargaining after final election results revealed that the dominant Shia alliance had failed to secure an absolute majority, while Sunni groups had made substantial political gains.

The Shia United Iraqi Alliance, which dominated the outgoing transitional parliament, won 128 out of 275 seats up for grabs, which will force it into a coalition, most likely with the powerful Kurdish coalition which secured 55 seats.

Even as the parliamentary blocks of both Shias and Kurds were reduced, the political muscle of the Sunnis received a major boost, a development that Western officials hope will entice disenfranchised Sunnis into the political mainstream and away from the bloody insurgency.

The main Sunni alliance, the National Accord Front, won 44 seats, while another block garnered 11 seats, making them a powerful force in the new political landscape. Sunnis held only 17 seats in the previous assembly.

Political leaders acknowledge that with more players now in the arena, many of them with contradictory goals, the negotiations to form a viable government against a backdrop of deepening violence will be a major challenge.

"This time it will be difficult," said Hoshyar Zebari, the Kurdish Foreign Minister, who predicted that bartering for key cabinet posts could drag on until the end of February. Adel Abdel Medhi, the Shiite Vice President tipped as a possible candidate for Prime Minister, has said it could take until April.

The first challenge will be to muster a two-thirds majority in parliament to nominate a presidency council, consisting of president and two deputies. They in turn will name a premier to form a cabinet. The unwieldy process was instituted by the Americans to prevent any single ethnic group from steamrollering its rivals in the fragile early days of Iraqi democracy.

The Shia alliance and the Kurds are widely expected to reunite in their existing coalition, but that will still leave them just short of the two-thirds mark. While they could draw on several of the smaller groups to pass the threshold, the Kurds have insisted that, like many Western officials, they want to form a broad national unity government which includes the Sunnis.

One of the key difficulties lies in the fact that the Shias and Kurds have core aims -federalism, and the regional distribution of oil wealth -- that are sharply at odds with the Sunnis, who believe the kind of loose federalism being proposed will lead to the break-up of Iraq.

The Shia alliance wants to emulate the northern Kurdish autonomous region in the oil-rich Shia south. Sunnis, who have no oil in their desert region of western Iraq, are strongly opposed to the idea.

Despite Sunni accusations of widespread electoral fraud, informal talks have already begun between the main Sunni block and the Kurds over the formation of a consensus government. Many observers believe the Sunnis could be offered the important defence portfolio to secure their collaboration.

"Now we are part of the election and we have seats in the National Assembly, so we have the right now to nominate a number of candidates to various posts but we’ll be a major part in negotiating the agenda of the government," said Tariq al-Hashemi, of the National Accord Front.

However, Hojetoleslam Abdel Aziz al-Hakim, the head of the main Shia clerical party, the Supreme Council for the Islamic Revolution in Iraq (Sciri), recently gave warning that merely placing Sunnis "in this or that post" would not have a serious impact in quelling the insurgency, hinting that only force would convince guerrillas of Iraq’s "new reality" - that the once dominant Sunni minority had been superseded by the majority Shia.

"Every day we are getting closer to accepting this reality. But there are some groups that will not accept this," he said.

"Those people will continue confronting the government ... Those people should be confronted firmly by the government."

The main losers in the elections were the US-backed secularists. Led by Iyad Allawi, the former prime minister, they suffered from growing sectarian rifts in Iraq that defined the latest vote. They have accused groups such as Sciri of violating election rules by using the portraits of powerful religious figures in their election campaigns.

"Unfortunately among many Iraqis at present these ethnic and religious and sectarian lines seem to be paramount," said Adnan Pachachi, a veteran Sunni diplomat who was one of only 25 candidates on Mr Allawi’s list to secure a seat.

A huge security lockdown was implemented in Baghdad and in unruly Sunni provinces for the announcement of the results, expected to trigger renewed attacks by die-hard terrorist groups. Officials said they had foiled a massive attack on Hojetoleslam al-Hakim’s residence, which allegedly would have involved a frontal assault by 50 attackers, including suicide bombers.

Breakdown of seats

United Iraqi Alliance (Shia): 128 seats

Kurdish Coalition: 53 seats

Iraqi Accordance Front (Sunni Arab): 44 seats

Iraqi Front for National Dialogue (Sunni Arab): 11 seats

Iraqi National List (secular): 25 seats

Islamic Party of Kurdistan: 5 seats

Reconciliation and Liberation Bloc (Sunni Arab): 3 seats

Risaliyoun (Shia): 2 seats

Turkomen Iraqi Front (Represents ethnic Turks): 1 seat

Iraqi Nation List (Sunni): 1 seat

Yazidi minority religious sect: 1 seat

Al-Rafidian List (Christian): 1 seat

Total: 275 seats

Times Recommends

• ‘Thousands of Tamils dying’ in Sri Lanka camp
• Jackson 'rebuilt his nose before he died'
• Tehran: militiamen attack protesters