KALE, Iraq (Reuters) - Beneath the green, white and red Kurdistan flag, Kurdish Peshmerga troops keep watch from hastily built earthen barricades on soldiers of the Iraqi national army dug in less than a kilometer away along a desolate stretch of road.
The standoff, for a moment last week so close to confrontation, is the most dramatic illustration of a growing rift between Baghdad and the autonomous northern region of Kurdistan. Frictions over oil revenues are exacerbated now by conflicting views of the Syrian rebellion and by territorial disputes that pose questions about the unity of Iraq.
Over a few days last week, Baghdad and Kurdish officials separately rushed troops to the Syrian frontier, ostensibly to secure it against unrest in the neighboring country; but the mobilization brought Iraqi Arab and Kurdish soldiers face to face along their own disputed internal border.
Washington intervened and a potential clash was avoided. But the standoff opened a new front in Baghdad's already dangerously fragile relations with the Kurds in their push for more autonomy from central government.
"We don't want to fight, we are both Iraqis, but if war comes, we won't run," said Peshmerga Ismael Murad Khady, sitting under a straw awning to ward off the sun, the battered stock of a BKC machine gun pointing not towards some foreign border but at fellow countrymen manning the Iraqi army post.
Just visible are Iraqi army trenches and tents beyond the empty stretch of road that is now a de facto no-man's land in this small frontline. Nearby, local cars kick up dust as they take sidetracks to skirt the two posts.
Behind the Peshmerga, a title that means literally 'those who lay down their lives', a battery of Kurdish 122-mm howitzers directs its barrels towards the Iraqi line. They are part of the heavier armour reinforcements Kurdistan and Iraq drafted into the disputed area just a kilometre from the Syrian border.
Always a potential flashpoint, tensions between Baghdad and Kurdistan escalated after U.S. troops left in December, removing a buffer between the Iraqi Arab dominated central government and ethnic Kurds who have run their own autonomous area since 1991.
Iraq's national army units and Peshmerga have faced off before, only to pull back before clashes as both regions tested each other's nerves, lacking however any interest in confrontation.
Iraq's Prime Minister Nuri al Maliki, a Shi'ite muslim, and Kurdistan President Masoud Barzani have sparred more aggressively since America's withdrawal, as Kurdistan chaffs against central government control.
At the heart of their dispute are contested territories claimed by Iraqi Arabs and Kurds and crude reserves now attracting majors like Exxon and Chevron to Kurdistan, upsetting Baghdad, which says it controls rights to develop oil.
Though autonomous, Kurdistan still relies on Baghdad for its share of the national oil revenues.
Kurdistan is growing increasingly closer to neighbour Turkey as it talks about ways to export its own oil and not rely on Baghdad. Maliki's government accuses Kurdistan of violating the law by signing deals with oil majors.
The rebellion against Syrian President Bashar al-Assad has only widened the rift between Baghdad and Erbil.
They find themselves in opposing corners of a regional struggle. Iraq with Syrian ally Iran is resisting calls for Assad to go. Kurdistan is in talks with the Syrian Kurdish opposition and closer to Turkey, a sponsor of Assad foes.
"In addition to the local dimension to this, there is the Syrian one," said Joost Hiltermann at International Crisis Group. "Control over the border and what crosses it, is therefore of great importance."
Those rivalries were clear when Iraqi troops began deploying to Syria's borders to help control refugees and spillover, and Peshmerga soldiers refused them permission to move into what they considered a Kurdish part of their disputed areas.
After calls from Washington, Kurdish government sources say, both sides agreed on Sunday to cooperate to avoid a flareup and to withdraw troops once Syria's crisis ends.
But the reinforcements remain in place.
It was not the first time top U.S. officials have stepped into Iraq's political fray.
Last year, Peshmerga sent 10,000 fighters to the disputed oil city of Kirkuk, officially to protect citizens there. Their presence sparked a massive U.S. effort to calm tensions.
It took a month before the Peshmerga pulled its fighters back. Analysts said the move was in part a Kurdish test of Maliki's resolve once the American troops had gone.
Kurdish officials say Peshmerga have long controlled the area near the Syrian border in disputed parts of Ninawa province and saw no need for Iraqi army deployment. Iraqi national border police are already working there.
Some Kurdish officials see Baghdad's military push along the border as part of an attempted landgrab.
"This force came without coordination or agreement, so the Peshmerga decided to stop them," said Jabbar Yawar, head of Peshmerga forces.
Baghdad countered that Iraq's army should be in charge of the country's borders, especially because of the turmoil in Syria, and accused Kurdish authorities of obstructing the military.
Troops were deployed just as Kurdistan announced oil deals with France's Total and Russia's Gazprom, the latest majors to ignore Baghdad's warnings they risked losing contracts with central government if they agreed to develop Kurdish fields.
"The bigger issue is that this exposed how relations between the two are very difficult," one diplomat said. "The situation in Syria has triggered long-standing differences."
In a goodwill measure, Kurdistan on Tuesday said it restarted 100,000 barrels per day (bpd) in oil exports a bid to end a payment dispute with the central government after halting the shipments in April.
For Baghdad, the Syrian question is a sensitive one. Iraqi Shi'ite leaders worry a messy collapse of Syria will lead to the rise of a Sunni regime and incite Sunni provinces along the border who feel Maliki is edging them from power.
Baghdad rejects Sunni Arab Gulf calls for Assad to go.
Barzani's government, in contrast, has hosted Syrian Kurdish opposition activists, actively pushing them to join forces to form a united front to prepare for any post-Assad regime.
Kurdish officials are not shy to admit a long-term goal of a fully independent Kurdistan, and they see a chance for Syrian Kurds to win some autonomy after years of oppression.
Regional power Turkey is increasingly being pulled into the fray, cultivating Iraqi Kurdistan but at the same time very wary of fueling broader Kurdish separatism in its own southeast.
Ankara wants Kurdistan to help guarantee Syria's Kurdish areas will not become a haven for Kurdish PKK rebels who are fighting the Ankara government for more autonomy in the southeast of Turkey.
Ankara's relations with Baghdad have deteriorated sharply.
A visit by Turkey's foreign minister to Kirkuk, whose control is disputed between Iraqi-Arabs and Kurds, last week prompted Baghdad to accuse Ankara of meddling. Turkish and Iraqi officials have exchanged sharp words in public.
The political posturing between Baghdad and Arbil is not lost on their new frontline in north Iraq, where Peshmerga troops fortify their trenches, run through drills and wait out an end to the impasse.
"We are just here to defend ourselves," said Peshmerga General Sarbaz Mamund. "They wait for orders from their political leaders, and so do we. But this area is Kurdish, just ask the people here."
Additional reporting by Ahmed Rasheed and Raheem Salman in Baghdad; editing by Ralph Boulton