* Arab Summit seen test for Iraqi security progress
* Regional turmoil risks upsetting gathering
By Waleed Ibrahim
BAGHDAD, Feb 1 (Reuters) - If Middle East unrest does not scuttle its plans, Iraq will host its first Arab League summit in two decades in March, giving its Shi'ite-led government a chance to reintegrate the country into a sceptical Arab world.
The meeting of Arab leaders also offers an enticing target for Sunni Islamist insurgents or Shi'ite militia trying to undermine Prime Minister Nuri al-Maliki, and will become a major test of Iraq's readiness to defend itself after U.S. forces withdraw this year.
Recent bombings that killed more than 150 people and wounded 500 underscored the problems Baghdad faces in combating a weakened but stubborn insurgency eight years after the U.S.-led invasion that ousted Saddam Hussein. [ID:nLDE70Q19C]
"I would not call this a gamble, but it is a challenge more than anything," Foreign Minister Hoshiyar Zebari told Reuters in an interview. "We both need this summit. It is important and challenging for Iraq, but it is important for Arabs too."
Maliki's main aim with the summit will be to reassure neighbouring countries, where many Sunni Arab-dominated governments view the rise of Iraq's Shi'ite majority with suspicion and fear the growing influence of Shi'ite power Iran.
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More than security, the summit may be disrupted by an uprising in Tunisia and protests in Egypt that are testing the region with its worst crisis in decades [ID:nLDE70O2DA].
"The unrest is still going on in these countries and may affect the date or even change the agenda of the summit. So far no one knows," said Shakir Kattab, a member of Iraq's Sunni-backed Iraqiya political bloc.
The stakes are high -- a successful summit would help Iraq to reassert itself as a major Arab nation and could also lead to reduced tacit support in some Arab countries for the insurgency.
A disastrous strike by suicide bombers or militants firing rockets and mortars, however, could set back by years Iraq's efforts to prove it is on a path to improved stability.
The Iraqi sectarian bloodshed unleashed after the 2003 invasion has subsided since its peak in 2006 and 2007, but bombings and killings continue daily, interspersed every four to six weeks by a major bomb or attack.
Despite the threat, the government has allocated hundreds of millions of dollars to rehabilitating six big hotels in Baghdad that were targeted by insurgents in the past.
It is renovating villas and palaces to accommodate delegates from 21 countries invited to the summit, repaving the main road from Baghdad airport and planting flowers and trees to try to prettify a city left in a shambles by years of war.
Mortars and rockets, which still target the fortified Green Zone district of government offices and embassies, are the main threat to the summit, Iraqi security officials said.
Two officials of the Iraq foreign ministry were recently assassinated in what some interpreted as an attempt to show that Baghdad cannot guarantee security before the meeting.
"If people interpret these recent attacks as a challenge or a threat to holding the summit of Arab leaders in Baghdad, I have to say this is simply not true," Maliki's media adviser Ali al-Moussawi said.
U.S. combat operations officially ended in Iraq in August, and the remaining 50,000 U.S. soldiers in the country are here to assist and advise Iraqi forces as they take over security. Those troops must leave the country by the end of 2011.
A U.S. diplomat said U.S. forces would advise and help their Iraqi counterparts, but remain in the background. (Writing by Waleed Ibrahim; Editing by Patrick Markey/David Stamp)
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