Allawi, who was hand-picked by Washington as Iraq's first post-US invasion leader, said in an interview that the country remains wracked by sectarianism, despite recent polls which saw religious parties routed at the ballot box.
The 64-year-old politician said the January 31 provincial election, hailed as a symbol of progress and improving stability by America and other leading states, was nevertheless flawed as millions of people were excluded from the process.
"Old members from the Baath Party, who never committed crimes, were not allowed to participate," said Allawi, referring to members of executed dictator Saddam Hussein's political movement.
"They were allowed to vote but not to be candidates in their own name. Lots of members of the armed forces and also Sadrists were not allowed to present themselves. This was a mistake."
Iraq is due to hold general elections at the end of 2009, or early next year. Allawi said if "irregularities" that occurred during last month's vote — including too few ballot papers and the exclusion of displaced people from voting — were repeated in the national polls there would be dire repercussions.
"If the mistakes repeat themselves then I am sure that Iraq will be engulfed in a fireball," he said.
"I hope that the international community will acknowledge this and try to exert pressure on the relevant groups, including the government.
"We are not going to have elections like in France or in London …but democracy is a process and to get to the end result we need to include the population. In France you cannot go and say 'this guy is a communist' and not allow him to participate."
The provincial polls were dominated by the State of Law Coalition headed by Prime Minister Nuri al-Maliki, a Shiite, who has adopted a secular outlook but whose bloc remains backed by overtly religious parties.
Allawi is chief of the Iraqi National List, which has 20 MPs in the national parliament and polled between 1.8 percent and 9.6 percent in the 14 provinces that took part in the vote.
"The issue is not to change the name or the colour — it is to change the mentality," said Allawi, who once plotted a CIA-backed coup against Saddam and survived a regime-inspired assassination attempt in 1978.
He said Iraq remains mired in sectarianism and the West has not done enough to reverse this.
"It has become the trend in Iraq: If you have a turban, Sunni or Shia, you are like Karl Marx," Allawi said, alluding to the overlap between politics and religion.
"Unfortunately, the secular forces are not supported by anybody, not by governments, including the governments of the United States, Western Europe or the moderate Arab and Islamic countries," he said.
"If this (a sectarian Iraq) emerges it will definitely cause more problems in the region and in the world."
The success of Maliki's allies in the provincial polls nine days ago was seen as a triumph for secular politics, but Allawi said the results masked deeper problems with Iraq's fledgling democracy.
"Those who have been advocating sectarianism for the past six years are (now) talking a different language, that of non-sectarian Iraq," Allawi said.
"This can either be for one or two reasons — either the sectarian people have changed their mind… or they want to change their colour to appeal to the people," he said, referring to the parties' desire to retain control in the provinces, despite their widely accepted failure to deliver basic services, such as water and electricity for ordinary Iraqis.
"I think by and large the Iraqis are fed up with the sectarianism because they saw only blood, stagnation of the economy and more unemployment," Allawi added.
The former premier also pointed the finger at Iran. "They have been supporting the sectarian forces in Iraq — most of the sectarian forces grew up in Iran. We are still far away from a stable environment, so we expect that regional countries will continue to interfere… to try to fill the vacuum."
