Kurds and Arabs in Mosul trade accusations that many fear would spur a battle for oil and power. Though representing a minority, Kurds prevail on the army in Mosul and control the provincial governing council after most Sunnis boycotted local polls in 2005. As for Christians, who are estimated around 250,000 to 300,000 in the province, they could be a swing vote, if they line with Kurds or Arabs in provincial elections.

Ambassador Thomas Krajeski, a senior U.S. official in Baghdad, described Mosul as the city "where all the fault lines that exist in Iraq come together".

"It is a place where Kurd and Arab officials can solve some of these key issues: what does it mean to be a federal Iraq?", he added.

This question is of a major importance as Kurds seek control of disputed cities, towns and villages along the "green line" that divides Kurdistan from the rest of Iraq.

Their economic and territorial ambitions appear more at risk. Recently, Kurdistan leader Massoud Barzani evoked the gathering resentment some Kurds feel toward Baghdad saying: "We seem to still be under the influence of a totalitarian regime. The one that takes over power thinks he has the last word in everything. He forgets coalitions, commitments and the constitution".

Brigadier General Tony Thomas, the top US commander in Mosul, said Al Maliki increasingly "sees the Peshmerga, as a militia" while Kurds are more nervous about what they see as Baghdad's growing unilateralism as U.S. troops prepare to withdraw.

Oil is behind all these rows mainly in kirkuk a city that accounts for a quarter of Iraq's oil exports. Arab-Kurdish disputes have so far held up legislation on how to share oil wealth. Meanwhile, Kurdistan has signed oil deals of its part, which Baghdad considers void. Oil producing companies in Kurdistan cannot export oil without Baghdad's authorization.

The impasse affects not just Iraq's oil sector but all investments as well.

"The United States cannot afford a conflict to break out between Kurds and Arabs if they want to withdraw their forces and claim success," Stansfield said.

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