With its huge reserves of oil, Kirkuk's future is more than just a local issue [GALLO/GETTY]

It is a volatile city, but one that is vital to Iraq's future, and Kirkuk is now facing its toughest test yet.

Just weeks before a scheduled referendum on the city's future, Arab residents are being paid to pack up and leave.

It is a controversial scheme, tied up in the struggle over which community should have control of Kirkuk and its huge oilfields.

The so-called jewel of the north lies around 250km northeast of the Iraqi capital, and has always been a valuable prize.

Oil production

Oilfields in Kirkuk and its surrounding region account for up to 40 per cent of Iraq's total production.

But it is in the city's demographic make-up that the problems start: The Kurdish, Arab and Turkmen communities all lay claim to Kirkuk.

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James Bays reports on the controversial policy

Decades of tinkering with the population means nobody's sure which families are originally from the city.

A referendum is due by the 31st of December, where residents must decide who should be in control.

The Iraqi government has however, begun pursuing a controversial policy of changing the town's make up it calls "normalisation".

Arab families in the ethnically divided city, mostly resettled from the south of Iraq years ago by Saddam Hussein, are getting paid to abandon their homes and go back.

Ali Isaeid Hadeed told Al Jazeera that he was paid $16,000.

Hadeed said: "I've been here for more than 20 years. No one is forcing me, I'm returning of my own will.

"My children have lived here and they don't know their relatives."

Reversing Saddam

The historic city of Kirkuk is the place the Kurds would like as their regional capital. But the Turkmen community claim they are the majority in the city.

A census has not been held for years.

We will not leave even if they want to slaughter us. We will stay here and let them come to us if they have anything"

With a referendum due at the end of the year, Rizgar Ali, head of the city council, said Saddam's policies must be reversed first.

"The defunct Baath regime implemented inhumane and wrong policies especially in Kirkuk," he said.

"It was ethnic cleansing, mass killings and the Anfal campaign. Eighty per cent of that campaign was targeted at Kirkuk.''

The Arab families started moving here over 25 years ago. It means a sizeable proportion of the Arab community were born in the city.

One butcher told Al Jazeera that he would not leave the city, no matter what sum he is paid.

''Where would I go? I was born here in Kirkuk. What would I do with 20 million dinar? I will be robbed on the road.

"We will not leave even if they want to slaughter us. We will stay here and let them come to us if they have anything."

The future of Kirkuk is not just a local issue, it also matters greatly to politicians in the capital.

It is key in the ongoing debate about the extent of federalism in the country, and who will control its substantial reserves of oil.

Source: Al Jazeera