Couple of cables discussing this

09BAGHDAD2562 (Part 1)
09BAGHDAD2561 (Part 2)

Iraqi contacts speculated that regional unease about a Shia-led Iraqi government, and about the democratic character of that government, a model that could eventually undermine the legitimacy of more autocratic regimes in the region, helped explain why some neighbors would prefer a weak and unstable Iraq, where security and political gains of the past two years are rolled back.

While some used proxies to foment violence, others restricted themselves to money, media (propaganda), and meddling, all designed to help shape electoral coalitions, and block or further individual political careers, in order to better control Iraq and keep it weak, politically fractured, and pliable

According to PM Maliki, neighbors also feared Iraq's "golden connection between Shia and Sunni Islam," a legacy that gives Iraq special precedence in the region. His argument is based on a well-acknowledged fact that Iraq is the grand junction of Shia and Sunni Islam as well as of the Arab world and Persia, making it, therefore, both strategically vital but also vulnerable.

Iraq views relations with Saudi Arabia as among its most challenging, given Riyadh’s money, deeply ingrained anti-Shia attitudes, and suspicions that a Shia-led Iraq will inevitably further Iranian regional influence. Iraqi contacts assess that the Saudi goal (and that of most other Sunni Arab states, to vary degrees) is to enhance Sunni influence, dilute Shia dominance and promote the formation of a weak and fractured Iraqi government.

Coincidentally, Iranian efforts are driven by a clear determination to see a sectarian, Shia-dominated government that is weak, disenfranchised from its Arab neighbors, detached from the U.S. security apparatus and strategically dependent on Iran.

Neither of these objectives is in the U.S. interest. In the longer term, we will need to flesh out ideas for a post-GCC security architecture that includes Iraq more fully, develops ways to contain Iranian regional influence, and shapes the special position Iraq will likely occupy in the Gulf in ways that further our interests and those of our Gulf partners.

The view of key contacts here is that some of Iraq's Sunni Arab neighbors have concluded that in a stable, peaceful Iraqi democracy, Sunni political power in Iraq would be finished. These Arab neighbors, therefore, conclude that the only way the Sunnis will ever come back into power in Iraq is in the wake of a period of sustained instability and violence that de-legitimizes democratic governance and the Shia as Iraqi political leaders.

The challenge for us is to convince Iraq neighbors, particularly the Sunni Arab governments, that relations with a new Iraq are not a zero-sum game, where if Iraq wins, they lose. We still have work to do to convince them that a strong, stable, democratic (and inevitably Shia-led) Iraq is the best guarantee that Iraq will be able to shake Iranian manipulation and see its future bound up with that of the West and its moderate Arab neighbors.
Saudi's seen as more pro-active in fomenting unrest
In the wake of bombings in predominantly Shia areas across the country in June 2009 that killed dozens, PM Maliki pointed publicly to one such statement, made by a Saudi imam in May, and noted, “We have observed that many governments have been suspiciously silent on the fatwa provoking the killing of Shiites.”

Some observers see a more malign Saudi influence. A recent Iraqi press article quoted anonymous Iraqi intelligence sources assessing that Saudi Arabia was leading a Gulf effort to destabilize the Maliki government and was financing “the current al Qaida offensive in Iraq.” The article also quoted MP Haidar al-Abadi, a Maliki political ally, insisting that Gulf Arab neighbors wanted to destabilize Iraq. A few of our more senior contacts hint at similar malign intentions “by some neighbors,” making clear without being explicit that they are referring to Saudi Arabia.
Syria is seen as problematic
Relations with Syria suffered the most precipitous decline in the wake of the attacks, with mutual recalls of Ambassadors and public statements making clear the GOI felt Syria was complicit. While Syrian support for Iraqi Ba'athists has long been a significant bilateral irritant, the GOIraq's public claim that Syrian-based insurgents were responsible for August 19 represented a significant shift.

To the al-Maliki government, the problem was now seen as an existential threat to the state and the GOI could no longer treat the issue with routine diplomacy, especially given fears these attacks were only the first wave.

Iraq's problem is that it is too weak on its own to intimidate Syria into behaving. With no troops "to mass on the border" as a threat, as Turkey had once done, and taking his cue from Lebanon's experience following the Hariri assassination, Maliki felt he had no recourse but to take the issue to the UNSC, hoping this diplomatic "stick" might persuade Bashar and his regime to back off. (NOTE: Not all Iraqi officials agreed with the PM's approach. On September 5, Iraq's three presidents -- Talabani, Hashimi and Abd al-Mahdi -- issued a statement calling for containing tension between Iraq and Syria through diplomatic channels, an obvious rejection of Maliki's insistence on UN involvement. END NOTE.)
Maritime border issues with Kuwait remain unresolved
At present, Iraq has unimpeded navigational access from the Gulf to the port of Um Qasr, but some two-thirds of the deep water channel of the Khor Abdullah now lies -- as a result of the 833 demarcation -- in Kuwaiti territorial waters. Some observers, such as Da’wa Party MP Sami al-Askari, have expressed concern to us that after U.S. forces withdraw fully, Kuwait will try to control Iraq’s access to the sea, “and that border demarcation will allow it.”
Iran's role is more in politics (for now) than military means.
Iranian influence in Iraq remains pervasive, as Tehran manipulates a range of levers to mold Iraq’s political, religious, social, and economic landscape. While significantly weaker than the Saudis and others on media, the Iranians fund political parties and key individuals (as other neighboring countries do).

Iraq and Iran have “very special, very frank talks” in which Iraq’s Shia-led government is able to push back effectively against Iranian influence on some fronts. Observers generally credit the Iranians with playing a more sophisticated game than the Syrians, as they try to shape the political process to their liking. These contacts acknowledge that Iran is providing some form of covert support to armed groups like the Promise Day Brigades and other small groups, but maintain they have stopped support for the big militias.
Turkey's role is seen as more benign
Bilateral trade is currently at $7 billion annually, and the two countries hope it will expand significantly in the coming decade. Moreover, Turkey has worked to improve its relations with the KRG, and they have significantly increased their diplomatic and commercial presence in the Kurdish areas. However, the Turks also have been active on the Iraqi political front, funding groups like the Mosul-based Sunni Al-Hudba movement, in an effort to offset Kurd influence in areas outside Kurdistan.

But it is the water issue that threatens to complicate an improving Iraq-Turkey relationship. According to DFM Labid Abbawi, Iraq needs a flow of 700 cubic meters of water for its needs but could get back with a minimum of 500. However, Turkey was only allowing a flow of about 230 cubic meters (with an uptick in August and September beyond that level). A recent visit to Turkey by the Iraqi Minister of Water was not very productive, he noted.