Violence-plagued, ethnically mixed and rich in oil, Kirkuk province stands at the heart of an Arab-Kurd dispute over territory in north Iraq that threatens the future unity of the country.

The province and its eponymous capital, home to Kurds, Arabs and Turkmen, are a key part of a swathe of territory the autonomous Kurdistan region wants to incorporate over strong objections from the federal government in Baghdad.

"From a geopolitical perspective, Kirkuk is hugely important because of the oil and gas reserves in its surrounding areas," said John Drake, an Iraq specialist with risk consulting firm AKE Group.

Ruba Husari, who edits www.iraqoilforum.com, said fields in Kirkuk "provide the bulk of the northern production," while an official from the North Oil Company put the province's output at between 425,000 and 450,000 barrels of oil per day.

And "from a political perspective," Drake said, "the control of the city (of Kirkuk) is a highly emotive issue for a large proportion of the electorate."

"Kirkuk is important for us not because of the oil that it has, but because it has been the symbol of our oppression and deprivation," said Falah Mustafa, the head of Kurdistan's foreign relations department.

But federal officials show no signs of willingness to let the province go.

Diplomats and officials say the territorial dispute between Baghdad and Kurdistan -- a three-province region with its own government, security forces, borders and flag but which still receives a portion of the federal budget -- is the greatest threat to Iraq's long-term stability.

Illustrating the potential for conflict, both sides deployed military reinforcements to areas of north Iraq including Kirkuk during high tensions last year. Kirkuk's governor, Najm al-Din Karim, said those forces are still present.

"We have... a face-off between (the) Iraqi military and Kurdistan military, and when you have a situation like this, it causes tension, and if something goes wrong, it can lead to (an) actual fight," Karim, a Kurd, told AFP.

"It doesn't help the communities who really want to live together, doesn't help investors coming into the city, doesn't help companies to come and work here when the security situation is precarious like it is," he said.

"I think if these issues are not resolved, it can lead to more significant problems including armed conflict, which can lead to, I think, (the) breakup of Iraq and destabilisation of the region," Karim added.

-- 'Playing the waiting game' --

According to Drake, the territory issue is not headed toward a speedy resolution.

"Players on all sides are... very good at playing the waiting game. They would likely rather sit it out for now than fight or even negotiate with any real conviction," he said.

A major point of contention between Kurdish and federal leaders is the establishment of a Kirkuk-based federal military command covering disputed territory.

Karim said the command was meant to include both army and police forces, which he likened to a "declaration of martial law," and that the dispute over it has gone so far as to hurt security operations in the province.

"We ordered all the directors of police not to obey the commands that are issued from Baghdad," Karim said. "So all the cooperation that used to exist when we had combined operations... between the police and the army has stopped completely."

Senior police and army officers in Kirkuk confirmed the suspension of cooperation.

While politicians bicker over the military command and territory, Kirkuk residents are the victims of frequent violence. Al-Qaeda's Iraqi affiliate has claimed some attacks, but it is not always clear who is behind them.

Samir Ismail said he still suffers from wounds he received when a bomb exploded near his clothes shop in the city of Kirkuk.

"There are many police and asayish (Kurdish security)", but "there is no security," Ismail said, standing next to a line of mannequins in his shop, located on a street that is scarred by shrapnel.

"How long will Iraq remain like this?" he said. "Every day there are explosions, every day there is killing, every day there is terrorism."

Salam al-Jaberi, who sells clothes in an outdoor market in Kirkuk, said the security situation had worsened.

He also said that while Arab and Kurdish politicians are at odds, relations among Kirkuk's communities are good.

"All of us, Kurds, Arabs, our relationship is continuing. There is no problem between the citizens, the problem is between the governments."