Ayad Allawi has reportedly threatened to quit the power-sharing government according to an interview with Britain's Times newspaper on Tuesday.
"Power-sharing is not happening," Allawi said. "It is not set to work in a meaningful way... If it does not change, I will not participate."
Despite his Iraqiya block narrowly winning elections in March, Allawi has seen religious parties coalesce to form the biggest grouping in the new parliament led by Prime Minister-designate Nuri al-Maliki.
Allawi, a Shia Muslim, claimed that Iraq's political system meant a non-sectarian politician could never succeed.
He laid the blame at the feet of Iraq's Shia neighbour, Iran: "There is a question mark on democracy now ... People realise that Iran has the upper hand and they feel Iraq is controlled by foreign forces."
He added: "Iran has obstructed the way to power-sharing. They have a red line against me personally and they do not want Iraqiya to participate in the new government."
Allawi said Iraqis were likely to quickly become disillusioned with any government that is formed.
"There is a lot of disillusionment among Iraqis, whether they voted for us or not," Allawi said. "They associated democracy with the fact that whoever got the highest numbers should spearhead the formation of the government."
(Sources: The Times, AFP)