Iraq faces the distinct possibility of collapse and fragmentation, British foreign policy think tank Chatham House says
Its report says the Iraqi government is now largely powerless and irrelevant in many parts of the country.
It warns there is not one war but many local civil wars, and urges a major change in US and British strategy, such as consulting Iraq's neighbours more.
The report comes as Iran said Iranian and US diplomats would hold talks on 28 May on the security situation in Iraq.
Iranian Foreign Minister Manouchehr Mottaki said the talks - the third such meeting - would be restricted to the subject of Iraq.
"Negotiation is limited to Iraq, in Iraq, and will start in the presence of Iraqi officials," he told reporters during a visit to Pakistan.
The situation in Iraq will form part of discussions between UK Prime Minister Tony Blair and US President George W Bush in Washington on Thursday.
It is Mr Blair's last official visit to the White House before he steps down as prime minister on 27 June.
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