By Patrick Markey
BAGHDAD (Reuters) - Iraqi President Jalal Talabani is to be transferred to Germany for treatment for a stroke that may end his moderating influence in a dispute edging Baghdad and the country's autonomous Kurdistan region closer to a confrontation over oil.
The portly 79-year-old former guerrilla, who has often mediated among Iraqi Shi'ites, Sunnis, and Kurds and between the Arab-led central government and the self-ruled Kurdish enclave, was admitted to hospital on Monday night.
Talabani survived wars, exile and infighting in northern Iraq to become the country's first Kurdish president a few years after the U.S-led 2003 invasion that toppled Saddam Hussein.
Talabani was in a stable condition and would most likely be transferred to Germany within 24 hours, Najmaldin Karim, the governor of the city of Kirkuk who is also part of the president's medical team, told Reuters on Wednesday.
A team of doctors from Germany who had treated Talabani for past illnesses had recommended he be moved there after evaluating him in a Baghdad hospital, Karim said.
It was unclear when or if the Kurdish statesman would be able to return to his post and his potential exit from politics could not have come at a worse time for the OPEC oil producer.
A year after the last American troops left, the Arab-led central government and the Kurdish region are caught in a rift over oil and land that threatens to escalate into fighting.
Prime Minister Nuri al-Maliki and Kurdistan have twice sent troops to face off along the internal border where both lay claim to ethnically mixed territories dotted with oilfields.
Turkey is also embroiled in the dispute, angering Baghdad by talking about energy cooperation and oil pipelines that would give Kurdistan a route to export its own crude and effectively end its reliance on the central government's funds.
With oil majors such Exxon and Chevron now shifting their focus northward to sign deals with Kurdistan and away from Iraq's southern oilfields, leaders on both sides are warning of the risks of the dispute sliding into an ethnic war.
"If it erupts ... it will be a painful, shameful ethnic conflict," Maliki said warning of the risks following last month's military build-up around disputed towns.
At the heart of the dispute is the oil wealth under the swathe of land know as the "Disputed Territories" along the vague internal border that includes the ethnically mixed city of Kirkuk, known to some as the "Jerusalem of the Kurds".
Baghdad has warned Exxon and other companies that deals struck with Kurdistan are illegal, a violation of what Iraqi officials see as a policy area that should be under central government control. The Kurds say the constitution's federalism guarantees their right to develop their region's oil resources.
"The government will take all necessary measures to stop Exxon working, especially in the disputed areas. They should know this is a red line they can't cross," one Iraqi oil official said.
"If they think they can do that then they will face dire consequences. They should expect everything including confiscation of their equipment and face the results of violating the constitution."
Cooler heads like Talabani and U.S. officials have mediated to prevent a confrontation across the line dividing the two regions. Neither Baghdad nor Kurdistan appear to have the appetite for open conflict that would risk oil exports.
But diplomats warn a small incident could quickly ignite wider fighting in tense times.
Iraqi forces and Kurdish Peshmerga fighters have faced off before only to back off before any serious confrontation. In August, a flurry of calls from U.S. officials helped ease a build-up near the Syrian border when both armies dug in less than a kilometer apart near disputed areas.
Talabani earlier this month brokered an agreement that would see them withdrawing their troops from disputed areas.
"He is the Kurd who is closest to the centre. He is close to the Shi'ites and to the Sunnis," said Iraqi political analyst Ibrahim al-Sumaidaie. "He is a very important regional player in creating balance."
Tensions are still high. Just hours after Talabani was hospitalized, Kurdish Peshmerga forces opened fire on an Iraqi army surveillance aircraft they said was spying on their positions north of Kirkuk.
"It's a clear message: Next time our response will be stronger," Anwar Othman, a deputy minister for Peshmerga affairs said after the incident.
For the Kurds, the disputed areas are an historic right. They are keen to reverse Saddam's policy of settling the areas with Arabs. Arabs say Kurds are seeking to rewrite history, and the Turkmen minority also lays claim to some areas as their own.
Baghdad and Kurdistan could not be further apart: They disagree on the right to manage the OPEC producer's oil wealth, how to share power in the central government and even now to interpret constitutional articles governing federalism.
Since 1991, Kurdistan has run northern Iraq, its own armed forces and government, but currently relies on the central government for its 17 percent share of the national budget and on Baghdad's infrastructure to export its share of oil.
After the last U.S. troops left, Maliki and Kurdistan's President Masoud Barzani have increasingly clashed as Kurdistan resisted what Kurds see as a Shi'ite leader determined to shore up his authority and deny them autonomy.
Under Iraq's constitution, parliament would elect a new president if his post becomes vacant. Iraq's power-sharing deal calls for the presidency to go to a Kurd while two vice president posts are shared by a Sunni and a Shi'ite.
But in an early sign of a messy future succession, senior Sunni political leaders suggested they may present their own candidate for the presidency in a challenge to the Kurds.
Among Kurds, political analysts said former Kurdistan Prime Minister Barham Salih is favored. But Talabani's exit could also prompt an internal struggle in Iraqi Kurdistan, where Talabani's Patriotic Union of Kurdistan party and rival the Kurdistan Democratic Party share power.
Iraqi law would see one of the vice presidents take over Talabani's duties before the parliamentary vote. But Iraq's Sunni Vice President, Tareq al-Hashemi, is a fugitive outside of the country after he fled to escape charges he ran death squads.
The other vice president is from Maliki's alliance.
Any parliamentary vote would also be complex, with Maliki locked in a struggle with Sunni, Kurdish and some Shi'ite rivals over power-sharing. Talabani was crucial in helping Maliki survive a no-confidence motion directed against him this year.
Since the fall of Saddam and rise to power through the ballot box of the Shi'ite majority, many Iraqi Sunnis feel they have been marginalized, especially under Maliki's government.
"Some Sunni leaders will sprint to try to get this post," said a Sunni leader in the Iraqiya block. "But anyone with any sense knows in the end they won't get it."
(Additional reporting by Aseel Kami and Suadad al-Salhy; Editing by Jon Hemming)