Nearly two years after US President Bush declared an end to major combat operations, Iraq is still at war, both with foreign and homegrown insurgents and, more tragically, with itself. Murder, kidnapping, corruption, sabotage and sectarian violence are now everyday occurrences for Iraqis, in a nightmarish scenario that shows no sign of reaching a peaceful conclusion any time soon.

Great expectations rest on the transitional government, the formation of which, it is hoped, will help the gradual return of law and order and promote national reconciliation. But the problems facing Iraqi politicians as they seek to form a new government are a microcosm of the ills facing the country as a whole.

Horse-trading

Two months after the historic January elections, there were few indications that a conclusive agreement could be reached between the main political parties. Horse-trading between the three main groups - the Shia-dominated United Iraqi Alliance (UIA), the Kurdistan Alliance List (KAL) and Interim Prime Minister Iyad Allawi's Iraq List - has seen deadline after deadline pass for the creation of a transitional government. Political jostling for the new cabinet positions and those of president, the vice-presidents and parliamentary speakers has been the principal cause of the delay. The two biggest parties, the UIA and KAL, have been unable to reach an agreement on who should hold which posts, while the long-running issue over the administration of the northern Kurdish region and the oil-rich city of Kirkuk is still as controversial as ever.

The roots of the political impasse can be traced to the transitional administrative law (TAL). Promulgated last year, the law states that a two-thirds majority is required to reach agreement on the composition of the new government. Despite having 51 per cent of the seats, the UIA has no choice but to negotiate with the Kurds. Mobilising the full strength of their position, the Kurds are driving a hard bargain, arguing that their nominated representative Jalal Talabani should become president and that they be allocated a 25 per cent share of all oil export revenue to do with as they please. They are also concerned that the UIA will use its parliamentary majority to push through legislation. KAL is seeking assurances that it could withdraw from the coalition to prevent bills it opposes from passing through parliament.

The UIA is understandably reluctant to go along with this. In an attempt to seize the opportunity, Allawi's Iraq List - the third largest party - is offering its support to the UIA on condition that Allawi remains prime minister. But, this is an unlikely scenario. Shia clerics have waited a long time to take control of a country in which they are the majority. Retaining Allawi - a secular Shia Muslim - would be hard to swallow.

The political hurdles are such that as it stands, agreement on the new government remains as elusive as ever. Conservative-leaning UIA member Ibrahim Jaafari is still frontrunner for the premiership, but this is by no means a certainty. If Talabani does indeed become president, a Shia and a Sunni will likely take up the two vice-president positions. It remains unclear who will take up the politically and strategically important finance, foreign a