The political bloc of Nouri al-Maliki, the incumbent Iraqi prime minister, has joined forces with its main Shia rival, the Iraqi National Alliance (INA), leaving the newly formed bloc just four seats short of a parliamentary majority.
Ibrahim al-Jaafari, a former PM, and Abdul Razzaq al-Kadhimi, an INA advisor, were flanked by officials from al-Maliki’s State of Law bloc as they made the announcement at a news conference on Tuesday .
"An agreement was reached to form a parliamentary bloc through the union of the two blocs, the State of Law Alliance and the Iraqi National Alliance," the officials said.
The officials made no mention of a resolution to the biggest stumbling block the two coalitions faced in weeks of negotiations - the choice of a prime minister.
Previous talks to create a pan-Shia alliance failed because followers of Moqtada al-Sadr, a Shia leader, who won 40 seats out of INA's 70 seats, refused any deal that would secure a second term for al-Maliki.
Al-Sadr's parliamentary bloc was behind Maliki's nomination for the premiership in 2006, but he angered Sadr, by sending government troops backed by US forces to crush his Mehdi Army militia in 2008.
According to full preliminary results from Iraq's March 7 election, al-Maliki's State of Law Alliance won 89 seats in the 325-member Council of Representatives and the INA, a coalition led by various Shia religious groups, won 70 seats.
While the resulting combination of 159 seats is just short of the required majority, the Kurdish Alliance of the autonomous Kurdish region's two long-dominant blocs holds 43 seats and has previously said it would join the new grouping if the two main blocs allied.
The Iraqiya list of former premier Iyad Allawi took the most seats in the election with 91 but looks set to be squeezed out.
Dhafir al-Ani, head of Iraqi Future Gathering, one of al-Iraqiya bloc components told Al Jazeera: "It is a blow to the will of the majority of Iraqi people, who voted for Iraqiya. The new Shia merge that is backed by Iran, would pull Iraq back to sectarianism."
Allawi had warned that an alliance of the two major Shia blocs that attempted to exclude his coalition from government could result in a return to violence in Iraq, which was torn by sectarian bloodshed that killed tens of thousands in 2006-07.
Tuesday's coalition would add fuel to the already existing fire over the interpretation of Iraqi constitution's phrase 'the biggest parliamentary bloc is entitled to form the government'.
Iraqi Federal Court ruled on March 28, one day after the announcement of results of March 7 election that the "biggest parliamentary bloc" could be one formed after the polls.
Iraqiya has been insisting that the federal court's decision is illegitimate and politically orientated.
The results are in flux, however, as electoral authorities are carrying out a recount of votes in the key Baghdad constituency, which accounts for 70 seats.
In addition, 52 candidates have been barred since the election, while nine others are awaiting a ruling on whether or not they will be allowed to take their seats.
INA is a union of Sadr's political movement and the Supreme Islamic Iraqi Council (ISCI), both are Shia parties with close ties to Tehran.