BAGHDAD: Islamic State fighters seized control of a town near a dam in northern Iraq Sunday, witnesses and a Kurdish official said.
The capture of Wana near Mosul Dam came after Sunni militants from the Al-Qaeda offshoot seized two other towns and an oil field in their first major defeat of Kurdish forces since sweeping through northern Iraq in June.
ISIS insurgents had earlier captured the northern Iraqi town of Zumar and a nearby oil field according to witnesses.
ISIS, which swept through northern Iraq in June almost unopposed by the U.S.-trained army, poses the biggest challenge to the stability of Iraq since the fall of Saddam Hussein in 2003.
After thousands of Iraqi soldiers fled the Islamic State offensive, Shiite militias and Kurdish fighters emerged as a key line of defence against the militants, who have threatened to march on Baghdad.
Kurdish forces had poured in reinforcements, including special forces, to Zumar, where they battled Islamic State fighters who had arrived from three directions on pickup trucks mounted with weapons, residents said.
Militants hoisted the Islamic State's black flag on buildings, a ritual that has in the past been followed by the mass execution of captured opponents and the violent imposition of an ideology that even Al-Qaeda finds excessive.
Islamic State has stalled in its drive to reach Baghdad, halting just north of the town of Samarra, 100 km (62 miles) north of the capital.
The Islamic State in Iraq and Greater Syria (ISIS) changed its name earlier this year and declared a caliphate in parts of Iraq and Syria. The group has already seized four oil fields, which help fund its operations.
It has been trying to consolidate its gains, setting its sights on strategic towns near oil fields, as well as border crossings with Syria so that it can move easily back and forth and transport supplies.
The group has capitalized on sectarian tensions and disenchantment with Iraq's Shiite Prime Minister Nouri al-Maliki.
Critics describe Maliki as an authoritarian leader who has put allies from the Shiite majority in key military and government positions at the expense of Sunnis, driving a growing number of the minority to support the Islamic State and other insurgents. He is also at odds with the Kurds.
The Kurds have long dreamed of their own independent state, an aspiration that angers Maliki, who has frequently clashed with the non-Arabs over budgets, land and oil.
After the Islamic State arrived, Kurdish forces seized two oil fields in northern Iraq and took over operations from a state-run oil company.
In July, the Kurdish political bloc ended participation in Iraq's national government in protest over Maliki's accusation that Kurds were allowing "terrorists" to stay in Arbil, capital of their semi-autonomous region known as Kurdistan.
In another move certain to infuriate the government, the Kurdish region is pressing Washington for sophisticated weapons it says Kurdish fighters need to push back Islamist militants, Kurdish and U.S. officials said.
But Maliki needs the Kurds to defend his government against Sunni insurgents.
Maliki is currently ruling in a caretaker capacity, having won a parliamentary election in April but failing to win enough support from the Kurdish and Arab Sunni minorities as well as fellow Shiites to form a new government.
He has rejected calls by Sunnis, Kurds and Shiites to step aside so a less polarising figure can form a power-sharing government capable of easing sectarian tension and countering the insurgency.
An official in the Northern Oil Company said Islamic State fighters had taken control of the Ain Zalah oil field and two other undeveloped fields - Batma and Sufaiya.
In a statement on its website, Islamic State said its fighters killed scores of Kurdish fighters in a 24-hour battle and then took over Zumar and 12 villages.
"Hundreds fled leaving vehicles and a huge number of weapons and munitions and the brothers control many areas," Islamic State said. "The fighters arrived in the border triangle between Iraq, Syria and Turkey," it said.
Islamic State's ambitions have alarmed other Arab states who fear their success could embolden militants in their countries.
On Friday, Saudi Arabia's King Abdullah called on regional leaders and religious scholars to prevent Islam from being hijacked by militants.
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