U.S. envoy urges Iraq Kurds to shun complacency

ARBIL, Iraq (Reuters) - Outgoing U.S. Ambassador Zalmay Khalilzad visited "the other Iraq" on Thursday, flying to the relatively peaceful Kurdistan region in the north which he praised as a "shining example" for the rest of the country.

But after commenting on the booming construction industry, as seen on his drive from the new airport terminal, and on the freedom of Kurds to enjoy picnics to celebrate the start of spring, he told Kurdish leaders not to rest on their laurels.

"It's a shining example of what's possible in Iraq when local leaders make a commitment to each other to work together," he told local leaders gathered for the opening of a water purification plant near Arbil.

"Even with the success that this region has had, there's a long way to go to achieve this region's full potential," said Khalilzad, standing in front of the plant which was adorned with a U.S. flag, a Kurdish flag and a picture of a Kurdish scene with the slogan "Kurdistan, the other Iraq."

Khalilzad, who also visited President Jalal Talabani in Suleimaniya, was making a farewell visit to the region just days before leaving Iraq to become ambassador to the United Nations.

He congratulated Kurds on reaching an agreement on a long- disputed oil law to regulate how to share Iraq's vast oil wealth around the country -- a key issue in reconciling Iraq's Shi'ite, Sunni Arab and ethnic Kurdish communities.

But he urged leaders to stamp out graft, try harder to reach a "national compact" and make the compromises needed to end violence, and to approve the oil law in parliament following the agreement of the cabinet "as soon as possible".

The prime minister of the largely autonomous Kurdistan region, Nechirvan Barzani, said that Kurds were committed to being part of a stable and secure Iraq.

"However, in return for this attitude and commitment we see it as our right to have our just demands fulfilled," Barzani said through an interpreter. "We believe many of the agreements that were reached have not been implemented fully."

He said Kurds had four key concerns: a fair share of Iraq's revenues; resolving the status of disputed areas, particularly the city of Kirkuk which lies outside of Kurdistan; freedom to direct its own economic development; and a fair share of reconstruction funds from abroad.

The status of Kirkuk -- a mixed city where Kurds, Shi'ites, Turkmen and Sunni Arabs live together -- is a delicate subject, not least because it sits on some of Iraq's richest oil fields.

A referendum is supposed to be held this year on its future, but the United Nations has warned sectarian violence is growing as the various sides try to boost their presence in the city ahead of the vote.

Barzani insisted a census and the referendum must take place this year: "What was taken from us by force must be returned peacefully and democratically," he said.