WASHINGTON (Reuters) - Iraq has emerged as the world’s second most unstable country, behind Sudan, more than four years after President George W. Bush ordered the U.S. invasion to topple Saddam Hussein, according to a survey released on Monday.

The 2007 Failed States Index, produced by Foreign Policy magazine and the Fund for Peace, said Iraq suffered a third straight year of deterioration in 2006 with diminished results across a range of social, economic, political and military indicators. Iraq ranked fourth last year.

Afghanistan, another war-torn country where U.S. and NATO forces are battling a Taliban insurgency nearly six years after a U.S.-led invasion, was in eighth place.

“Iraq and Afghanistan, the two main fronts in the global war on terror, both suffered over the past year,” a report that accompanied the figures said.

“Their experiences show that billions of dollars in development and security aid may be futile unless accompanied by a functioning government, trustworthy leaders, and realistic plans to keep the peace and develop the economy.”

The index said Sudan, the world’s worst failed state, appears to be dragging down its neighbors Central African Republic and Chad, with violence in the Darfur region responsible for at least 200,000 deaths and the displacement of 2 million to 3 million.

The authors of the index said one of the leading benchmarks for failed state status is the loss of physical control of territory or a monopoly on the legitimate use of force.

Other attributes include the erosion of legitimate authority, an inability to provide reasonable public services and the inability to interact with other states as a full member of the international community.

Foreign Policy magazine is published by the Carnegie Endowment for International Peace, a Washington-based think tank. The Fund for Peace is an independent research group devoted to preventing and resolving conflicts.