IRAQ - Horse-Trading Begins.

While politicians started power-sharing talks between Shi'ite, Kurdish and Sunni leaders which may lead to a way out of the crisis, about 5,000-10,000 demonstrators representing Sunni Arab and secular Shi'ite groups marched through Baghdad on Dec. 27, claiming the massive lead taken by the Shi'ite Islamists in the elections stemmed from fraud and voter intimidation. The unusually large Sunni-organised demonstration indicated a new push by community leaders to use mass protest as a means to influence the political process.

Marchers demanded elections be re-run, but also called for the formation of a national unity government - a move leaders of the Shi'ite-led United Iraqi Alliance (UIA) as well as Kurdish figures have already said was likely. Iraq's independent elections commission is evaluating complaints about the elections, including three dozen serious "red" allegations that could affect the distribution of seats, before releasing final election results. However, few Iraqi politicians expect the complaints process to mean big changes to the balance of power in parliament, which according to preliminary vote counts sees just under half the total seats going to the UIA. Kurdish and Sunni Arab groups are likely to take around 15-20% of seats, respectively.

With little indication that these projections will dramatically shift, Iraqi leaders are holding a series of meetings in the Kurds' northern self-rule area to discuss the creation of a national unity government. Meanwhile, Iraqi oil officials quoted by Dow Jones on Dec. 27 said Deputy Prime Minister Ahmad Chalabi would take over the Oil Ministry, replacing Ibrahim Bahr ul-Uloum, who has taken a month's leave. Bahr ul-Uloum is reported to be disgruntled with the current government and earlier last month threatened to resign over a rise in local gasoline prices.

The US Position: General Peter Pace, the new chairman of the US Joint Chiefs of Staff, on Dec. 25 said the plan to reduce American troop levels in Iraq depended on how the situation in the country evolved over the next several months. The Los Angeles Times quoted Gen. Pace as echoing the words of Secretary of Defence Donald Rumsfeld who recently visited Iraq. He said there was no specific number of troops the US wanted to keep in Iraq now that the general elections were over.

If the insurgency is strong, Pace said on the Fox News Sunday talk show, it was possible troop levels could rise, not fall. "So if things go the way we expect them to, as more Iraqi units stand up, we'll be able to bring our troops down and turn over that territory to the Iraqis. But, on the other hand, the enemy has a vote in this, and if they were to cause...problems that required more troops, then we would do exactly what we've done in the past, which is [to] give the commanders on the ground what they need. And in that case, you could see troop level go up a little bit to handle that problem".

US reduction would "be visible" on a map of Iraq. Pace said: "You'll be able to have two colors on it - one that's currently controlled mostly by coalition forces, and the other that's currently controlled mostly by Iraqi forces - and watch the colors change". Pace admitted that Iraqis wanted US and other foreign troops to leave. Saying: "They don't want us to leave tomorrow, but they do want us to leave as soon as possible".

Former Secretary of State Colin Powell, speaking on ABC News's "This Week", said the number of US troops in Iraq will decrease because the military just could not sustain current levels. He said if Iraq was to be ready to take over from the US, the issue of private militias was to be confronted. "We don't want to go out and fight all the militias, but somehow the Iraqis are going to have to put in place a political system that says the only ones who hold the power of the state, the military and police power of the state, is the state and not individual militias that are loyal to a particular secular or religious figure. ...And so, just don't see it as we create a new parliament and we get some new leaders for the country, and that does it".

"No", Powell said, adding: "What you really need is institutions, what you need is the rule of law. And the rule of law says that the power of the state has to belong to the state and not to militias. And I think this is going to be one of the real challenges for the new political leadership of Iraq, as well as for the United States and the coalition partners.

The Washington Post reports on the third effort by US troops to pull out of the restive city of Samarra'. While violence has decreased - especially since the US troops built an earthen wall stretching over six and a half miles and threatening to shoot anyone who tried to climb it - each time the US force has pulled back, the insurgents have returned in greater numbers. US officials are hoping that Iraqi police, who they believe are more prepared for the job, will fill the security void left by the US departure.

US military officials say they will not transfer individual detainees to Iraqi custody until a higher level of care can be demonstrated. This position came two weeks after US and Iraqi troops discovered over 100 abused prisoners in Iraqi jails. A US military spokesman, Lt. Col. Barry Johnson, was last week quoted as saying: "A specific timeline for doing this is difficult to project at this stage with so many variables. The Iraqis are committed to doing this right and will not rush to failure. The transition will be based on meeting standards, not on a timeline".

Prisons have been a troubled area for relations between Iraq's Shi'ite Arab majority and the Sunni Arab minority. Most of the prisoners found recently were Sunnis. The US wants to fix the situation in such a way as to improve relations between the two communities. The BBC says the US military acknowledged that most Iraqi prisons were severely overcrowded, and the original date when the US would hand over complete care of the prisoners to Iraqis could be pushed back.