The confrontation in Qarah Tappah in Diyala province came on Sunday as US Vice President Joe Biden held talks with Iraqi leaders in Baghdad, providing a reminder of the flashpoints that Iraq still has to resolve as US troops prepare to withdraw.

Biden discussed ways to end Iraq’s deadlock with President Jalal Talabani in an effort to push leaders to bridge their differences, which have created a dangerous political vacuum.

US military leaders fear that long-running disputes between Kurds and Iraqi Arabs over land, oil and power could lead to Iraq’s next major conflict as the bloodshed unleashed after the 2003 US-led invasion recedes. US troops, and local leaders, intervened in Qarah Tappah and calm had returned, officials said. No one died.

Accounts of the fistfights and exchanges of gunfire given by Iraqi were contradictory and the US military had no comment.

A police official in the town said the incident began when a Kurdish peshmerga force parked in a “provocative” position in a market place, blocking other traffic. An Iraqi Army patrol ordered the Kurdish fighters to move but the peshmerga refused. Both sides then started trading insults until a scuffle broke out.

“The Kurdish vehicle drove away and it seems they went to get help. When they came back later clashes erupted,” he said. “The Kurdish peshmerga were the first to open fire at the Iraqi military force, wounding two Iraqi soldiers.”

One Kurdish peshmerga member was also wounded, he said.

The official report of the incident said the clashes began when an Iraqi Army vehicle crashed into a peshmerga Humvee and another car, an official in the Diyala operations centre said.

A gunfight then broke out between Iraqi soldiers and Kurdish police, the official said.

One soldier and policeman were injured and fistfights later erupted between Kurdish fighters and Iraqi troops manning joint checkpoints in the area.

“This is not dangerous. These soldiers and peshmerga working on these checkpoints are young. They cannot control their tempers,” the official said.

A third version given by a local Kurdish leader said Kurdish fighters beat a soldiers so badly his commanding officer ordered troops to storm the local peshmerga headquarters.

The Iraqi soldiers went in shooting, he said. Four of them were wounded. He had no information about peshmerga casualties.

US forces have tried to bridge the divide between Kurdish and Iraqi army forces in disputed areas, which Kurds claim as part of their semi-autonomous northern enclave, by organizing joint Iraqi-Kurdish security checkpoints.

The US military believes that by working together, the two sides can grow to trust each other. But the cooperation may vanish after US forces withdraw from Iraq at the end of 2011.

The US military plans to end combat operations in August ahead of next year’s full pullout, as President Barack Obama refocuses US efforts and resources on the war in Afghanistan, where the Taleban has proved resilient.