James Hider (left), Times Correspondent in Baghdad, explains the likely outcome of the talks to form the first permanent Iraqi government since the fall of Saddam Hussein.

"The horse-trading over the next government of Iraq bids to be fiercer than ever before, as this is the real thing now - not a transitional authority but the first independent, four-year government since the fall of Saddam.

"The first battle is going to be for the presidency, and it is here that the fact that the Shia and Kurd coalition partners have failed to get a two-thirds majority is going to be crucial.

"The Americans have installed a rather unwieldy process in the Iraqi constitution whereby you have to have two thirds majority to nominate the president and the two vice-presidents. It was intended as a safeguard to stop any particular ethnic group from steamrollering the others in the early days of Iraq's democracy.

"It has been criticised, as Western democracies don't even have that provision. Anyway, the Shia Muslims and Kurds are three seats short of that two-thirds majority, so it seems they will have to form an alliance with someone else.

"The main Shia group would like to drag in another Shia group: but the Kurds suggest bringing in a Sunni group, the National Accord Front, which would result in a broad-based government of national unity representing the whole of Iraq.

"Some of the Shias are ambivalent about this, muttering that it's a democracy and they won, so why should they bring in these people? Others say that bringing in a few token Sunnis won't make any difference to the insurgency, and that it is equally important to have a vigorous opposition.

"But it looks like the Kurds will press their point and have a national unity government, because the US are pressing very strongly for it as well. Abdul Aziz Hakim, the Shia leader of the Supreme Council of Islamic Revolution In Iraq (Sciri), who narrowly escaped assassination today in a Sunni plot, has also said that they need inclusiveness and Sunnis on board.

"We could quite possibly see Jalal Talabani back as President, as he has been nominated by the Kurds as their choice.

"Once the presidential council is sorted out, the Shia - as the largest political grouping - will choose the Prime Minister. This is likely either to be Ibrahim al-Jaafari again, the current Prime Minister, or Adel Abdel-Mahdi, a former communist who has now turned into a more moderate Shia conservative.

"The reshuffle and the reallocation of power is likely to be seen at the level of the vice-presidents and deputy prime ministers, which are also very important posts.

"After that there will be a battle for the five main ministries: interior, defence, finance, foreign and oil.

"It seems like that the Sunnis will get defence, which is a very important post, as a lot of policing activities are carried out by the Iraqi National Guard, who are part of the army.

"In theory, if they bring more Sunnis into the army to patrol Sunni neighbourhoods the number of insurgent attacks may go down, as the rebels may be less likely to kill Sunnis than the Shia and Kurd soldiers who are seen as collaborating with the Americans.

"The Sunnis are also adamant that they want control of the Interior Ministry taken away from Sciri, whom they have accused of installing their own supporters as policemen, running death squads and torturing Sunni detainees.

"But the Shias are extremely insistent on de-Baathification, getting rid of the officials of the old regime. This is seen as an excuse for keeping Sunnis out of positions of authority, as many leading Sunnis were prominent in Saddam's Baath party, while the Shia leadership were mostly abroad during the era of Saddam and claim that they have clean hands.

"The main stumbling block to forming a government will be that the Shia and Kurds want Iraq to be run along the lines of a broad-based, loose federalism.

"The Shia want to copy the Kurdish autonomous region in the north, setting up their own federal region in the south to include Baghdad. They also want the revenues from newly-discovered oil to stay in the region where it is found, which has particularly upset the Sunnis as there isn't any oil in their regions in central Iraq.

"So the talks are going to be very, very tough. The earliest that a cabinet is likely to be announced is late February, and it could go on into April or even beyond."

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