Baghdad, the epicenter of Iraq’s sectarian bloodshed, is starting to rebuild its shattered infrastructure, but political feuds and the threat of renewed attacks could reverse progress, officials said on Wednesday.

Sectarian strife remains a great threat despite improving security, Iraqi leaders said at a conference on Wednesday, hours after a powerful roadside bomb exploded not far from where they met in central Baghdad.

Prime Minister Ehud Olmert said on Wednesday talks on Palestinian statehood must be predicated on the recognition of Israel as “the state of the Jewish people”, a new Israeli condition.