Allawi, a secular Shiite, said a proposed merger to form a government between Prime Minister Nuri Al-Maliki's State of Law coalition and fellow Shiite bloc, the Iraqi National Alliance (INA), whose leaders have close ties to Iran, would effectively be a return to sectarian government.
"This will cause a very severe and serious backlash in the country. It will take it to square one," Allawi told Reuters in an interview. "It will really be quite devastating." "Unfortunately, and God forbid, I can see violence, and maybe severe violence." Allawi rode strong support from Iraq's Sunni-dominated northern and western provinces to win a March 7 parliamentary election that he said showed the "true colours of Iraq" as a non-sectarian state.
Maliki's State of Law bloc and the INA won in predominantly Shiite southern regions.
The tight election could mean weeks of negotiations to form a government and highlighted the depth of Iraq's sectarian divisions. Iraqis hoped the election would produce stable government after years of sectarian warfare, as US troops prepare to pull out by the end of next year.
Allawi said he did not see a role for himself in a "sectarian" government dominated by the two Shiite coalitions, which he said would be unable to bring in Sunnis who supported him.
"Sectarianism is something I stand against," he said. "I think the only solution is for Iraq to be secular. No other way."
Allawi said his political opponents were using unfair tactics to shove him aside as they tried to build a coalition to control a majority of Iraq's 325-seat parliament.
Iraqiya won 91 seats to 89 for Maliki's State of Law and 70 for INA, a bloc dominated by anti-American cleric Moqtada Al-Sadr.
He cited as an example a post-election attempt to disqualify six winning candidates for alleged ties to Saddam Hussein's outlawed Baath Party. Allawi said all six were Iraqiya members, and he had heard there was a move afoot to eliminate 16 more.
He said harassment of his coalition and its candidates had been growing since the vote results were announced on Friday.
"This is a political issue. They want to get rid of their opponents. They want to undermine us," Allawi said "They want to undermine the winner, and this is an unacceptable practice. It's not compatible with democracy. It's really a way to hijack democracy." Allawi, who was at one time highly critical of Shiite neighbor Iran for supporting Shiite militias fighting in Iraq, said Tehran also appeared to be trying to prevent him from becoming prime minister.
He noted that leaders of other winning election blocs had traveled to Iran in recent days but Tehran did not extend its hand to Iraqiya.
"We were surprised that we saw that other groups were invited to go there. We were not invited," he said. "This really cast a big shadow of doubt. Why did this happen? Why were we not invited?" Allawi said he was prepared to reach out to all of Iraq's neighbors, including Iran.
"We have nothing against Iran. They had an objection (to me) in the old days but now they say they don't have," he said.
Allawi insisted Iraqiya, as the coalition that won the most seats in parliament, should have the first chance to form a government.
His position was cast into doubt by a court ruling requested by Maliki that seemed to favor his State of Law coalition.
The ruling said the coalition with the most seats when parliament convenes should have first crack at the government, not necessarily the one with the most after the election.
"I don't mind whether (I) become a prime minister or not," he said. "But what I mind is Iraqiya won." Asked if he would accept a lesser role, such as speaker of parliament, under a government led by the two major Shiite parties, Allawi did not discount it completely but said: "It's not a job which motivates me."
