IRAQ - UN/Arabs In Regional Stabilisation Efforts.

The UN is appealing to Iraq's neighbours to play a more constructive role in averting a worsening of sectarian violence through establishment of a new "contact group" of regional powers. In an address to the Security Council (UNSC) on March 16, the UN's special envoy for Iraq Ashraf Qazi said: "Iraq's stability is intrinsically linked to the stability in the region and vice versa... As a concrete step to increase regional engagement, I have proposed the establishment of a regional contact group that would bring together Iraq's regional neighbours to discuss how to improve stability in Iraq".

UN officials insist discussions are at an early stage, but say they would like the group to meet in Baghdad, on a regular basis, at a working level. Qazi is holding a series of meetings to drum up support for the idea, and intends to press his case on March 28 when the Arab League's summit meets in Khartoum. The group could comprise Iraq's direct neighbours, plus possibly Egypt and the Arab league, and may try to agree some principles such as non-interference. Its Baghdad location could encourage states to raise their diplomatic representation in Iraq.

Bringing together Iraq's neighbours around a common strategy is crucial at a time when the conflict between Iraq's Sunnis and Shi'ites risks exacerbating tensions between the two communities elsewhere in the Middle East. Arab states have been more outspoken in expressing concerns over Iran's influence in Iraq and have encouraged the Cairo-based Arab League to take a more active role in mediating between Iraqi political factions.

Arab officials say the idea of a contact group has been floated as the US and UK look to share the burden of Iraq in the face of spiralling violence and deadlock in the political process. But this more direct handling of Iraq - foreign ministers from the region already regularly meet to discuss Iraq - would need the approval of a new Iraqi government and would depend on the exact role of the contact group.

Iran and the US on March 16 signalled they were ready to make their first contact in nearly three years by talking about the future of Iraq. But the US closed the door on broadening the scope of the dialogue to include Iran's nuclear ambitions, insisting it would leave that to the UNSC. Khalilzad had offered talks with Iran months ago.

Iran's acceptance on March 16 came as the US administration released its first National Security Strategy since 2002. The "Bush doctrine" upheld the principle of pre-emptive military action despite the failure to find WMD in Iraq. The lengthy document accused Iran of interfering in Iraq and identified Tehran as possibly the most serious nuclear proliferation challenge to the US.

US National Security Adviser Stephen Hadley said international pressure on Iran was having an impact, adding: "We are, I think, beginning to get indications that the Iranians are finally beginning to listen. And there is beginning to be a debate within the leadership, and I would hope a debate between the leadership and their people about whether the course they are on is the right course for the good of their country".

The FT on March 17 quoted diplomats as pointing out, however, that the US sorely needed Iran's help in getting Iraq's factions to form a government of national unity and avoid sectarian warfare. They noted that the US had run into serious resistance at the UNSC from Russia to a draft presidential statement calling on Iran to renew its suspension of uranium enrichment activities. Talks are to continue this week.

The announcement that Iran was ready for talks on Iraq came from Ali Larijani, Iran's top nuclear negotiator and secretary of the Supreme National Security Council (SNSC). He said he was responding to a March 15 call for "dialogue" between Tehran and Washington from Abdul-Aziz al-Hakim, head of the Shi'ite Supreme Council for Islamic Revolution in Iraq (SCIRI) and a long-term ally of Iran.

The timing of Larijani's remarks fuelled speculation in Tehran that the Shi'ite theocracy had opted to try to avoid confrontation. The FT on March 17 quoted a senior Iranian official as saying: "The important thing is how to get out of the crisis with the Security Council, especially with the recent radicalisation of the US position towards talking of 'regime change'".

On taking office in August, Larijani had set up a team to study talks with the US. It is led by his brother Mohammad-Javad Larijani, a former deputy foreign minister who has advocated normalisation of relations with the US. The Larijani brothers are the sons of the late Grand Ayatollah Amoli, who was among the leaders of the theocracy's conservative, pro-bazaar right-wing camp calling for the private sector to play a much bigger role in Iran's economy and the petroleum sector. Before Imam Khomeini died in 1989, he sent Amoli to Russia to advise then President Gorbachev that Communism was coming to an end and that Moscow should a adopt a more pragmatic approach towards the Muslim world, with emphasis on Iran.

The Larijani brothers - not keen on President Mahmoud Ahmadi-Nejad - are said to be behind proposals for entente with the US to be part of wide-ranging energy integration between Iran, Iraq, Syria and Lebanon. There are proposals to link the four states by electric power lines and oil and gas pipelines, enabling Iran to export energy and petrochemicals to Europe through the Mediterranean (see gmt12SyriaGasTrade-Mar20-06).

The FT on March 17 quoted an Iranian official as saying: "[Ali] Larijani has taken the first step towards a deal with the US but it may have come too late". US rhetoric against Iran has been mounting in recent weeks. But an APS source close to the Larijanis says the chances of an eventual deal with the US are stronger than the Iranian "pessimists" think, because the global package they are offering also boosts the chances of peace between Israel and the Arabs, although another APS source doubts that the US can buy such ideas while the nuclear issue has not been resolved.

Sunni leaders opposed to US-Iranian dialogue on March 17 denounced the agreement, saying the talks would amount to "unjustified interference" by foreign nations in Iraq's domestic affairs. The Sunni IAF bloc said it was "not committed, under any circumstances, to any results of these negotiations" and insisted that Iraq's affairs be managed by Iraqis alone.

The Sunni leadership has long criticised Iran's influence over Iraq's powerful Shi'ite religious parties, and its opposition to bilateral talks could add an obstacle to the grinding efforts to forge a coalition government. Naseer al-Ani, a member of the Sunni bloc, said: "The Iraqis in the current government [rather than Khalilzad] should have these talks with the Iranians and talk about the level of intervention of Iran". In Tehran, Ali Larijani said he was acting at the request of SCIRI leader Hakim.

Criticism by the IAF came as leaders of Iraq's major blocs, as well as Khalilzad, gathered in the compound of Talabani to discuss formation of a government. Several participants said the discussions focused on the proposal to create a kind of national security council. Some groups, including the Sunni parties, want such a council to have binding authority; others, including the Shi'ite leadership, are insisting that it have only an advisory mandate.

Visiting Sydney, US Secretary of State Condoleezza Rice on March 16 raised the heat over the nuclear issue, accusing Tehran of lying about its activities and again calling Iran a "central banker to terrorism". She began a three-day visit to Australia, which will include talks with Canberra and Japan over the Iranian issue. She described Iran as a "troubled state" where an "unelected few repress the desires of its population".

Ms Rice said the US would work through the UN in an attempt to force the Iranians to allow inspections of their nuclear facilities. She said: "I'm quite certain... the Security Council will find an appropriate vehicle for expressing again to the Iranians the demands of the international community".

Ms Rice focused on US concerns about the rapid development of China, urging Beijing to open up its economy and be "transparent" about its military build-up, and said US-China ties faced "difficult issues... I heard...there's going to be a 14% increase in the Chinese defence budget. That's a lot. China should undertake to be transparent about what their military build-up means".

Qin Gang, Beijing's foreign ministry spokesperson, on March 16 responded by saying: "China has adopted a defensive national strategy - we have appropriate military transparency measures. China regularly publishes white papers on national defence in detail...(Our] national defence policy is totally transparent - it's defensive...". (Ms Rice urged China to have an open trading policy, citing concerns about intellectual property rights, a fixed currency and continued government ownership of large parts of the economy. She was on March 18 to meet Australian PM John Howard in Melbourne before returning to Sydney for trilateral security talks with her Australian and Japanese counterparts Alexander Downer and Taro Aso, respectively.

(Ms Rice said: "The growth of the Chinese economy, if done in a rules-based way in which China is fully obeying the rules of the global economy, is a positive development for international growth and for the US". Downer last week distanced Australia from Ms Rice's recent hawkish comments that China could become a "negative force" in the region. Standing alongside her in Sydney on March 16, Downer said: "I think we feel comfortable with where the US is at in terms of its relationship with China. Our relationship with China has its own dynamics. We have our own issues". Australia is careful not to antagonise China it views as a huge opportunity. The two countries are negotiating a trade pact and Canberra is poised to rubber-stamp the export of uranium to the China).