CORRECTED: Gates, in Iraq, seeks to ease Kurd-Arab tensions

(In July 29 story, corrects Gates' quote in paragraph 12)

By Jim Wolf

ARBIL, Iraq (Reuters) - U.S. Defense Secretary Robert Gates on Wednesday urged Iraq's ethnic Kurds and majority Arabs to resolve their entrenched dispute over oil and land before a scheduled American troop withdrawal by 2012.

U.S. troops have helped defuse several standoffs between the Kurdish Peshmerga soldiers and Iraqi forces over the last year, one facet of the row pitting semi-autonomous Kurdistan region against Arab leaders in Baghdad.

Gates told Kurdish President Masoud Barzani that Washington was prepared to provide "whatever assistance we can to help resolve these disputes in a peaceful manner," Pentagon press secretary Geoff Morrell told reporters on board a U.S. plane.

At the heart of the feud with the Baghdad government is control over the oil-producing region of Kirkuk, which Kurds consider their ancestral homeland and want to make part of their semi-autonomous Kurdish enclave. The city's Arabs and Turkmen fear Kurdish hegemony.

The dispute has intensified, leading to fears of violence. Some fear Iraq's waning insurgency might style itself as an Arab bulwark against Kurdish encroachment.

Gates was on the second day of a previously unannounced visit to Iraq, and on Tuesday met Iraqi Prime Minister Nuri al-Maliki. Morrell said Gates had delivered to Maliki the same message he relayed to former guerrilla leader Barzani.

"He reminded his hosts that we have all sacrificed too much in blood and treasure to see the gains of the last two years lost to political differences," Morrell said.

QUICKER WITHDRAWAL?

Accompanying Gates in Arbil was General Ray Odierno, the top U.S. commander in Iraq, who on Tuesday called the dispute the "number one driver of instabilities" in the country.

"I think he's (Gates) optimistic that there can be follow-through on these issues sooner rather than later. The clock is ticking on our presence in Iraq," Morrell said.

There are some 130,000 U.S. troops in Iraq, and combat troops are due to withdraw by the end of August next year, part of a plan for a complete pullout by the end of 2011.

U.S. combat troops withdrew from Iraqi city and town centers on June 30, and on Tuesday Gates praised Iraqi security forces' leading role since then. He said current security in Iraq could allow for a quicker U.S. departure.

"I think there's at least some chance of a modest acceleration," Gates told reporters.

The number of U.S. combat brigades in Iraq had been scheduled to go down to 12 from the current 14 by January, when Iraq goes to the polls in its first national elections since 2005, but Gates said the number could fall to 11 instead.

His visit comes as Iraqi officials prepare to announce the results of weekend presidential and parliamentary polls in Kurdistan which, despite an unprecedented challenge from opposition groups, are seen as unlikely to unseat Barzani from the presidency and shatter his allies' grip on power.

There is some hope that Iraqi and Kurdish officials may be more ready to make concessions now that Kurdish electioneering, characterized by fiery rhetoric about disputed areas, is over.

Potential Iraqi purchases of U.S. weaponry was also an important point in Gates' visit, his 10th to Iraq as Defense secretary, as Iraqi forces take the lead for security.

(Writing by Mohammed Abbas: editing by Missy Ryan and Philippa Fletcher)