* Who from Afghanistan will attend NATO summit?
* Leadership vacuum a headache for the alliance
* Prolonged crisis could impact key security agreements
By Hamid Shalizi and Jessica Donati
KABUL, Aug 1 (Reuters) - Who, if anyone, will represent Afghanistan at next month's NATO summit is becoming an increasingly pressing and awkward question for the alliance, as it seeks to withdraw most of its troops and bring a long and deadly engagement closer to completion.
Afghanistan's two presidential candidates remain at loggerheads, unable to agree who won an election the West hoped would signal a smooth transition of power and confirm Kabul's readiness to take over the running of the war-torn nation.
A day before the new leader was due to be sworn in at the presidential palace in the Afghan capital, and four months after the first round of voting, the incumbent, Hamid Karzai, remains in place.
Diplomats say that he could be invited, or pick who represents the country, at Celtic Manor in Wales on Sept. 4-5.
The prospect of Karzai's participation raises technical problems - the constitution deems his term is already complete.
It also risks upsetting the United States, with whom Karzai has had a fraught relationship, and complicating the signing of two agreements that would allow the United States and NATO to keep some soldiers in Afghanistan for training and counter-insurgency operations.
Without the pacts, which both presidential candidates have said they would sign but Karzai rejects, all foreign troops must leave by the end of the year, just as the hardline Islamist Taliban insurgency ups attacks on civilian and military targets.
"They (NATO) don't want him (Karzai) to spoil the party," said one diplomat, who asked not to be identified.
RISK OF EMBARRASSMENT
Not only are civilian casualties from Taliban attacks at their highest since U.S.-led forces overthrew the movement in 2001, but foreign aid is dwindling and the economy is suffering.
Those circumstances make a swift resolution to the political crisis pressing, but there is little sign of compromise between Ashraf Ghani, a former World Bank official, and Abdullah Abdullah, a former Afghan foreign minister.
With the country carrying out a complete recount of some eight million ballots cast during the run-off vote in June, and amid allegations by Abdullah of widespread fraud, the formation of a proposed unity government could drag on for months.
"We really hope that the election is wrapped up by then (the NATO summit) ... it will be a huge concern for us and the international community if this drags on," said Tahir Zaheer, a spokesman for Ghani, the winner of the run-off presidential vote according to a preliminary count.
"It is for the next president to participate, but if we are invited and the election result is still unclear, we will not go because it will be embarrassing."
Abdullah favours sending both candidates, or their envoys, to represent Afghanistan at the summit.
"Karzai hasn't signed the BSA or the SOFA, plus the election's fate is in the air, so there is no point in him going. This is a matter of the country's future," said Mahmoud Saikal, a top aide to Abdullah.
Both Abdullah and Ghani say they will sign the bilateral security agreement (BSA) and the Status of Forces Agreement (SOFA) to allow some U.S. and NATO forces to stay in Afghanistan beyond an end-of-year deadline for foreign troops to leave.
"It is crucial that the next Afghan president signs the required security agreements for our post-2014 presence without delay," a NATO official in Brussels said.
"Time is of the essence, and as the secretary-general has made clear, without legal agreements there can be no NATO-led training mission after 2014."
INAUGURATION DAY PASSES
Saturday's swearing-in ceremony was to have marked the first democratic transition of power in the country's history.
The inauguration had been scheduled five weeks before the NATO summit, an occasion where member states were due to trumpet the Western alliance's achievements in Afghanistan 13 years after the Taliban was driven from power.
A few weeks after the NATO summit, the new Afghan leader had also been due to take his position on the international stage in New York at a sitting of the United Nations General Assembly.
The Karzai administration said a new leader would be sworn in by the end of August. Karzai's spokesman Aimal Faizi said the audit and result of the election would be known by Aug. 25.
"There will be no extension because Afghanistan is suffering," he said, also insisting that the new president would attend the NATO summit.
But Western diplomats fear the U.N.-monitored audit of the June election could take months to complete, given the snail's pace of progress so far.
The NATO official said no decision had yet been taken on who would be on the invitation list to the summit.
"It is essential to let the audit process run its course and it is therefore premature at this stage to take any decision with regard to individual invitations to the summit."
Western diplomats in Kabul say one option would be to send one of either the foreign, defence or interior ministers to attend both the NATO summit and UN General Assembly. (Additional reporting by Jeremy Laurence in Kabul, David Brunnstrom in Brussels, Michelle Nichols in New York; Writing by Jeremy Laurence; Editing by Mike Collett-White)