It should be Iraq's biggest success story. Beneath the soil of Kirkuk lies oil worth billions of dollars - the world's sixth-biggest reserve.

Yet there is no sewerage system, the roads are cracked, rubbish is strewn all over the pavements, unemployment is as high as 40 per cent and there is no sign of any improvement.

Even more worrying - to the Government as well as to the US-led coalition - is that the city is being pulled between different ethnic groups, making it the most dangerous issue facing Iraq.

The Kurds of Kirkuk, who are a majority and hold the top political and security posts, believe that the city belongs to Iraq's largely autonomous Kurdish north.

After years of “Arab-isation” as Saddam Hussein tried to ensure control of its oil wealth, offering poor Arab families money to relocate there, Kirkuk is now filling with Kurdish families returning in their droves.

The Arab settlers have the option to go back to their original towns and cities for a cash payment of 20 million dinars (£9,100).This worries and infuriates the Arabs and the city's other main ethnic group, the Turkomans. They want Kirkuk to stay under the control of Baghdad or for it to be made an independent zone where power is shared.

All sides are equally passionate about their cause, with Kurdish leaders talking of protests if their rights are eroded, while Arab and Turkoman politicians pledge to resist to their last breath any move to make Kirkuk part of Iraqi Kurdistan.

All sides can, however, agree on one thing: the frenzy over the city is because of its oil and gas wealth. “The citizens of Kirkuk have a saying that the blessing of oil has become a curse,” Abdulrahman Mustafa Fattah, the Kurdish Governor of Kirkuk, told The Times.

“Oil has destroyed our land; oil has changed the demographics ... Even now we feel there is an injustice done to Kirkuk because of oil.”

Caught in the middle is the United Nations, which has the unenviable task of trying to devise a compromise solution to which everyone will agree.

“It is probably the most delicate and potentially explosive issue in Iraq,” Staffan de Mistura, head of the UN Assistance Mission for Iraq, said. “That is why we are giving it top priority.”

The arguments that put politicians at loggerheads have yet to feed down to the street, where ordinary Kurds, Arabs and Turkomans insist that they remain friends. Press the people of Kirkuk about their hopes for the future, though, and the ethnic fault-lines soon emerge.

“What the Kurds want the Arabs don't. What the Arabs want the Kurds don't. And the Turkomans don't really agree with either side,” said Nisreen Shukur, 33, a Kurdish teacher who was one of thousands pushed out by Saddam but who returned after his overthrow.

Arabs and Turkmen, upset by the demographic realignment, accuse the two main Kurdish political parties of exploiting the system to enable additional Kurds to move in. They also claim that Arab and Turkoman families are being forced to leave to manipulate further the ethnic ratio in the Kurds' favour.

“We cannot get jobs, our families are displaced and those who speak out get kidnapped, killed or arrested,” said Ahmed Hamid al-Obeidi, general secretary of the Arab Unity Bloc, the main Arab political grouping in Kirkuk. “The Kurdish parties have hurt us in a way that is unprecedented in history.”

Kurdish leaders deny charges that they are behaving to others as Saddam did to them.

“Did we ever commit acts of genocide?” asked Rizgar Ali, head of the city's provincial council and a leading member of the Patriotic Union of Kurdistan (PUK). “Do we put people in mass graves?”

Rifts over Kirkuk's status have delayed the passage of a law on provincial elections, throwing into doubt the prospect of a nationwide poll before the end of the year. This has dismayed the United States and Britain, who regard this as a crucial milestone; the Iraqi parliament is due to wrestle with the problem when it reconvenes next month.

In addition, Mr de Mistura says, the UN is working on a variety of proposals for the city to be put first to the various factions, and then eventually to a referendum.

Everyone knows how high the stakes are. Last month a suicide bomber blew himself up among a crowd of banner-waving Kurds in the city centre who were protesting against draft election legislation. In the violent chaos that followed, a mob of angry Kurds attacked the offices of a Turkoman political party. More than 25 people were killed in total and over 200 were injured.

Ahmed Askari, a Kurdish provincial council member who sits on a committee that deals with reconstruction, says that Kirkuk, source of enormous wealth, is itself being neglected by the central Government.

“Who owns the petrol?” he asked. “All the money is taken by Baghdad and spent on cities across Iraq but Kirkuk is at the end of the list. We only get the smoke, dirt and occupation of the land.” he said.

Mr Askari believes that the city should receive compensation for helping to generate the main source of Iraq's income.

Mahbuba Kakamir, a rotund Kurdish housewife, summed up the feelings of many of Kirkuk's people. “What is the use of living on a sea of oil if it does not improve my life?”

Melting pot

— Kirkuk claims to be the oldest site of continuous occupation in Iraq

— It is the capital of Tamin province and sits on top of 13 per cent of Iraq's oil

— The ethnic mix of the 1.2 million population is unknown; Turkomans and Arabs opposed a census

— Kurds seized the city after the US invasion in 2003

— A referendum on Kirkuk’s fate was shelved last year

Source: www.reliefweb.com; www.globalsecurity.org

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