By Patrick Markey

BAGHDAD (Reuters) - Iraq's Prime Minister Nuri al-Maliki will seek to showcase his country's diplomatic return to the region this week when leaders gather for the first Arab League summit in Baghdad in two decades, and the only one hosted by a Shi'ite Arab ruler.

With violence from its war waning and the last U.S. troops gone, Iraq is keen to present itself as more stable and re-assert its clout in an often hostile Arab region, where the Iraqi Shi'ite-led government's rise riled Sunni Arab Gulf neighbors.

Neighboring Syria's upheaval will dominate the three-day summit among the Arab League leaders, who have been split over how to react to the violence between government troops and rebels trying to oust President Bashar al-Assad.

Wary of the region's delicate sectarian makeup, Baghdad must balance a fledgling detente with Sunni Arabs deeply suspicious of Iraq's ties to Shi'ite power Iran against calls for it to take a stronger stance against Tehran's main Arab ally Syria.

The summit also comes at a sensitive time for Maliki, who is emerging from a crisis that threatened to scuttle Iraq's power-sharing deal among Sunni, Shi'ite and Kurds and renewed regional fears Iraq might slide once again into sectarian violence.

Visiting dignitaries will get a glimpse of an Iraq whose long conflict has ebbed, but also see an OPEC member whose population still struggles with the daily threat of bombings, power shortages and a crumbling infrastructure nine years after the U.S. invasion that ousted Saddam Hussein, a Sunni.

Far from normalcy, tight security has converted Baghdad into a maze of checkpoints and roadblocks with thousands of extra troops drafted in to try to guarantee insurgents cannot damage the summit with bombings or mortar attacks.

At least nine leaders, including U.N. Secretary General Ban Ki-Moon and officials from countries ranging from Kuwait to Somalia, plan to visit for the summit held in the expansive former Saddam-era palace complete with a lake.

Iraq wants to highlight the attendance of officials, even if not top leaders, from Sunni nations like Saudi Arabia and Qatar, as a sign of progress in a neighborhood long wary of the rise of Iraq's Shi'ite majority since the fall of Saddam.

"What does it mean for a country like Saudi Arabia to be in Baghdad, it is very important," Foreign Minister Hoshiyar Zebari told a press briefing on Monday. "It's a huge change, it is a major leap... for Iraq."

Acrimony with its Sunni Gulf neighbors had twice delayed the summit, especially over a crackdown by Bahrain's Sunni rulers on Shi'ite protesters when fellow Sunni monarchies Saudi Arabia and United Arab Emirates sent in troops to help.

In the weeks before the meeting, Iraq pursued a steady campaign of detente with Gulf nations. Saudi Arabia named its first envoy in two decades, Kuwait reached a $500 million deal to end a Gulf War-era standoff over debt, and Baghdad paid $408 million to Egyptian workers who fled the Gulf War.

The summit will be held as Sunni powers and Shi'ite Iran increasingly jockey for more influence in the Middle East, split along sectarian lines over Syria's crisis and Western sanctions on Tehran.

Sunni powers like Qatar and Saudi Arabia are also likely to keep pushing for Iraq to take a stronger stance on Syria, where Baghdad has taken a more measured position and rejected economic sanctions called for by the Arab League. But breaking that deadlock will be difficult.

"No big decisions are expected from the Baghdad summit, but the biggest gain is the return of convening routine Arab summits after the halt last year, and also the return of Iraq to the Arab arena," Sudan's representative to the Arab League, Kamal Hassan Ali, told Reuters.

SPRUCING UP, EMERGING FROM CRISIS Continued...