Iraq election winner Iyad Allawi said on Saturday he was open to alliances with any faction and wanted quickly to form a government that would build strong relationships with its regional neighbors.

Allawi's secular, cross-sectarian Iraqiya bloc won by a two-seat margin in preliminary results released on Friday over the State of Law coalition led by Shi'ite Prime Minister Nuri al-Maliki, who said he would challenge the results.

With neither of the leading blocs close to the majority needed to rule alone, the tight race portends lengthy and divisive negotiations to form a government as Iraq seeks to escape years of sectarian warfare and US troops prepare to pull out.

'The Iraqiya list's decision is to be open to all powers starting from the State of Law headed by the prime minister, Nuri al-Maliki,' Allawi said at a news conference.

'Iraq does not belong to anyone or any party but it belongs to all Iraqis.'

Allawi, a secular Shi'ite who served as prime minister in 2004-05 after the US invasion that ousted Saddam Hussein, and his Iraqiya partners took 91 seats in parliament to 89 for Maliki's State of Law coalition in a vote that exposed the depth of Iraq's sectarian divide.

Violence erupted when Iraq's political leaders took five months to form a government after the last parliamentary vote in 2005. Allawi appeared to try to allay fears of a repeat.

'We hope to form the government as quickly as possible. A government that is capable of providing security and to offer the appropriate services to its people,' he said.

But perhaps signaling the difficulties ahead, Allawi said the road to a new government led through Iraqiya, an apparent reference to Maliki's declaration on Friday night that he was on his way to forming the biggest bloc in parliament.

'The Iraqi people chose the Iraqiya to be the base to start talks with the other parties according to the constitution,' Allawi said.

Officials with Maliki's coalition and from the third-place finisher, the Iraqi National Alliance, a bloc with close relationships with Shi'ite neighbor Iran, have said they are working toward a merger. The two combined would hold 159 seats, close to the majority needed to form a government.

INA includes the Sadrist political movement of anti-American Shi'ite Moqtada al-Sadr, who is studying in Iran and is shaping up to be the new kingmaker of Iraqi politics.

His party performed beyond expectations in the election, outpolling its INA partner, the Supreme Islamic Iraqi Council, which was formed in exile in Iran.

In a sign of Sadr's newfound muscle in Iraqi politics, representatives of State of Law and the Sadrists traveled to Iran on Friday to meet with Sadr, according to INA sources.

But any attempt by the major Shi'ite blocs to sideline Allawi could lead to resentment among Sunnis pushed to the side when the majority Shi'ites rose to power following the US invasion that toppled Saddam Hussein.

While Maliki and the INA are seen as having close ties to Iran, Allawi is viewed as having better relations with Arab states. At one time he was highly critical of Tehran for supporting Shi'ite militias in Iraq, but is reported to have sought to mend fences.

Allawi said on Saturday that the new government should work on strengthening political and economic ties with its neighbors and end long-running disputes over borders with countries such as Iran and Kuwait.

'We should not forget that the stability of Iraq is from the stability of the region... The coming government should work to deepen this concept,' he said.

Underscoring Iraq's fragile security and the tensions caused by the election, two explosions in the town of Khalis, in Iraq's mainly Sunni northern Diyala province, killed at least 42 people and wounded 65 just hours before the release of the results on Friday.-Reuters