THE Iraqi parliament's inability to agree on a new government in its first session was a "regrettable failure", Iraq's most powerful Shi'ite cleric, Grand Ayatollah Ali al-Sistani, has said in a sermon delivered by his aide.

Mr Sistani intervened a week ago in Iraq's political crisis by urging lawmakers at their opening session to put aside disputes and form a new government to tackle an insurgency spearheaded by an al Qaeda splinter group that could fracture the country.

But on Tuesday parliament's first meeting since its election in April ended without progress toward a government after Kurdish and Sunni Muslim lawmakers walked out, complaining that Shi'ite Muslims had not decided on a prime minister.

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Mr Sistani's aide Ahmed al-Safi said in a sermon yesterday: "Last Tuesday the first session of parliament convened.

"People were optimistic that this would be a good start for this council in its commitment to the constitutional and legal texts.

"But what happened afterwards, in that the speaker and his deputies were not elected before the session finished, was a regrettable failure."

The prime minister has traditionally been Shi'ite in Iraq's governing system set up after the USs toppled Saddam Hussein in 2003, while the speaker of parliament is Sunni and the largely ceremonial president is Kurdish.

None of the blocs has settled on a nominee. Opponents of Prime Minister Nuri al-Maliki blame his divisive rule for the worsening crisis and are demanding he be replaced.

Mr Sistani also reiterated his call for the new government to have "broad national acceptance", a formulation many officials have interpreted as a signal Mr Maliki should step aside.

The comments came as up to 30 insurgents were reportedly killed after Iraqi government airstrikes targeted Islamic militants trying to capture the country's largest oil refinery.

Fighters from the Islamic State group have been trying to capture the Beiji facility.