WATCH: Iraq looks to a rosier future

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The appointment of Iraq's new Prime Minister Designate, Adel Abdul Mahdi, has given Iraqis and international observers a cautiously optimistic view of the country's future.

It has been played out in front of increasing tensions between the United States and Iran, both key players in the country's politics. The selection suggests sectarian loyalties between Iraq's previously intransigent factions giving way to more pragmatic coalitions that cut across sectarian lines.

It's taken 5 months to appoint Adel Abdul Mahdi, 76, a Shiite with no recent party affiliation and represents a compromise by the top finishers in May’s election.

He faces a daunting list of problems as he builds a cabinet for parliamentary approval.

Top of the list will be Basra. The oil rich city has faced a toxic water crisis that saw over 100,000 people hospitalised and has seen violent demonstrations against the inept handling of the crisis.

He then faces the unenviable task of weeding out corruption from public and private life in Iraq.

The heightening tensions between the United States and Iran will likely be a key factor in Iraq's future as political expediency weighs heavily on the resource rich, cash poor country.