One of Iraq's biggest Arab Sunni parties said today that it might back the country's constitution but called for changes to a text agreed by the Shia-dominated parliament.
US President George W. Bush hailed the draft as a breakthrough, but he predicted an October referendum on the document would spark "atrocities" after minority Sunnis, whose community is the seat of the insurgency, rejected the text.
But the Iraqi Islamic Party, seen as moderate Islamists who oppose violence, have said there was still room for negotiation on the constitution.
"We have not signed the constitution and we still have the time starting from now until the referendum comes," a party spokesman said. "We might say yes to the constitution if the disputed points are resolved."
The text read to parliament failed to overcome objections by Sunnis, who lost their political dominance with the fall of President Saddam Hussein, despite intense US efforts to broker a compromise between Iraq's divided ethnic and religious groups.
The United States and Britain, who see approval of a constitution as key to defusing an insurgency, welcomed the draft, hailing it as a victory for democracy over extremism.
However thousands of more hardline Sunni demonstrators rallied in Saddam Hussein's hometown of Tikrit today to denounce the constitution.
At least 2,000 protesters assembled near the office of the Association of Muslims Scholars - a hardline Sunni clerical group opposed to the US occupation - carrying Iraqi flags and portraits of the former dictator.
Sunni negotiators delivered their rejection in a joint statement yesterday shortly after the draft was submitted to parliament.
They branded the final version as "illegitimate" and asked the Arab League and the United Nations to intervene.
The country's Sunni vice president, Ghazi al-Yawer, did not show up at a Sunday ceremony marking the completion of the document.
When President Jalal Talabani said that al-Yawer was ill, senior government officials laughed.
Sunnis fear federalism would lead to the breakup of the country into a Kurdish north and Shia south, deprive Sunnis of Iraq's vast oil wealth concentrated at the opposite ends of the country, and open the door to Iranian influence in the Shia south.
Sunnis also wanted no reference to Saddam's party, fearing that would lead to widespread purges of Sunnis from government jobs.
Although Sunnis account for only 20 per cent of Iraq's estimated 27 million people, they still can derail the constitution in the referendum due to a concession made to the Kurds in the 2004 interim constitution.
If two-thirds of voters in any three provinces reject the charter, the constitution will be defeated. Sunnis have the majority in at least four provinces.