KIRKUK – Fifty kilometers out of Kirkuk, an oil city in Northern Iraq, the main road from Baghdad is already lined with tanks, artillery, Humvees and patrolling soldiers. Life has returned to the military barracks and checkpoints from the Saddam Hussein era that locals had thought were left behind for good.

Tents have also been erected, and you can see officers walking around together pointing at the surrounding hills as if discussing a defense strategy. Nearly all vehicles bear an Iraqi flag – red, white and black with the Arabic words "Allah is Great" in green in the middle.

In the barracks there are also black flags and flags with the likeness of Shiite Imam Hussein on them. There is no doubt that this Iraqi army division, which is mainly made up of Shiites, is preparing for battle and is psyching itself up for it.

At city limits there’s a border beyond which one sees only policemen, from Kirkuk"s multi-ethnic "joint forces" that the Americans created before their final retreat from Iraq nearly a year ago.

Leaving Kirkuk and heading north in the direction of Erbil, the capital of the semi-autonomous region of Kurdistan, the picture changes again. There are tanks, artillery, Humvees and large numbers of soldiers here too – they aren’t flying the Iraqi flag but the Kurdish one with the bright yellow sun at its center. Also: the men are wearing peshmerga – Kurdish freedom fighter uniforms.

The fighting around Kirkuk is notching up. What the United States described as an unresolved conflict, warning of the possible outbreak of civil war, when they withdrew their troops is coming to a head. Here, it’s not about Sunnis and Shiites but Arabs and Kurds.

Right now, things are quiet. Three car bombs have gone off in the center of Kirkuk, and many streets are blocked. On the square in front of the Governor’s Palace where the town council also meets, more security forces are standing around than usual. Shopkeepers and restaurant owners are debating whether or not to close up or stay open.

"They’re trying to sow chaos so that afterwards they can claim they’re the ones who are trying to maintain order," somebody says by way of explaining the car bombs. The men who are gathered around agree that Arab terrorist groups are behind the accelerated series of attacks in Kirkuk because the devices are mostly placed in parts of the city inhabited by Kurds.

Since the "Arab army" moved just outside of the city, the terrorists have had an easier time getting through, says Omeed, the owner of the ice cream shop.

With about a million residents, Kirkuk is an unusual mix of ethnicities and religions. All Iraq’s peoples are represented here. Only Baghdad has such a mixed population.

But Kirkuk is also the city where most of the Turkmen in Iraq live. They make up about a third of the population. Arabs and Kurds supposedly each make up another third, but these figures are disputed – one of the reasons for local conflicts. The main issue dates back to October 14, 1927, when a huge geyser of oil spurted skyward out of Baba Gurgur just outside the city.

The curse of oil

"If only we didn’t have the oil, it’s become a curse," Omeed says. He has decided to close shop and accept his cousin’s invitation to dinner at his grand house, where a dozen Kirkuk businessmen have gathered.

The atmosphere is tense; the men are nervous. They have never been in a situation like this, says a distinguished older man named Audshi. He is the head of one of the richest Turkmen families in Kirkuk. "We are surrounded by two rival armies that could start fighting any minute now,” he says. Yes, Saddam’s attacks here in the 1980s were brutal: he forced Kurds to leave and moved Arabs in so that he could control the oil. But the enemy was only from Baghdad that time – this time it’s from Baghdad and Erbil, the capital of autonomous Iraqi Kurdistan.

Not all the guests share Audshi’s view. At the table, as the discussion heats up over kebabs and kofta meatballs, the differences of opinion illustrate all too well the splits that cripple Kirkuk.

Nausad is a Kurd with a Turkmen wife who served for years in Saddam’s army – he now sides with Kurdish President Barzani who claims Kirkuk for Kurdistan.

Haider is a Shiite Arab has been dubbed "Maliki" by the others because he supports Iraqi Prime Minister Nouri al-Maliki in Baghdad who does not want the Kurds to take over ever more of Kirkuk and the so-called "conflict areas" surrounding it.

Mahmoud, a Sunni Arab whose mother is a Kurd, disagrees with both those positions: to his mind "the spats between Erbil and Baghdad are destroying us."

The men keep switching between Kurdish, Arabic and Turkmen – most of Kirkuk’s inhabitants speak the three languages, and some even speak four: the tiny Christian minority speaks Assyrian. When the group breaks up at 10 P.M., they have managed to come to a common position, however – it would be best for everyone if Kirkuk were to become an independent, autonomous city.

There is an article in the Iraqi Constitution that calls for a popular vote to take place by Nov. 2007 to determine what should happen in Kirkuk. But the referendum has yet to take place.

Meanwhile the conflict around Kirkuk has come to be about a lot more than the oil issue. "We do not agree with Arab politicians who want to create a Shiite state here based on the Iranian model," says Muayad al-Tayeb, the speaker of the Kurdish Alliance in the Iraqi parliament in Baghdad.

"We also don’t want a Sunni-Arab nation that is basically a one-party dictatorship, as it was in Saddam Hussein’s day." The Kurds want a democratic federal state: "That’s the underlying issue behind this conflict."

The head of the United Nations Assistance Mission for Irak (UNAMI), Martin Kobler, also sees the Kurdish-Arab conflict worsening in Kirkuk and surrounding areas. "The political factions haven’t been talking to each other for a year," he told Die Welt. "The Kurds and the Arabs may live in one country but they don’t talk to each other enough."

There still are no oil and gas laws to regulate the sector, says Kobler, and most of the unexploited oil and gas fields are in the conflict area. "When the Kurds and Arabs reach agreement about divvying up the riches of the land, the political issues will be easier to deal with."

Kobler is counting on provincial elections that will take place next April to calm spirits in and around Kirkuk. The last elections weren’t held because the Arabs called for a boycott. But he believes that "a newly elected provincial council can create the necessary dynamism to deal with the problems" – normalization of relations between ethnic groups, a census, then a referendum.

Says Omeed about the Kobler’s optimistic view: “We still have a long way to go.” As a Turkmen he has a somewhat more realistic take on things. Even if the conflict were to wind down in his city, he sees no reconciliation between the Arabs and the Kurds on the horizon.

In Erbil, Kurdish President Barzani has already signed oil contracts independently of Baghdad, and improved relations with Turkey. He is also trying to get Syrian Kurds on board: "We’re getting a great deal closer to an independent Kurdish state," he says.

This morning’s there’s a downpour so severe the water streams through the streets of Kirkuk. Omeed’s ice cream shop is closed again.