Iraqi Kurds say they are determined to fight for the oil-rich province of Kirkuk at any cost and until the "very last Peshmerga fighter".

On Monday, Iraqi government forces launched a "major operation" to retake key areas of Kirkuk.

For three days, thousands of Kurdish Peshmerga fighters and Iraqi government troops - supported by Iranian-backed paramilitaries known as Popular Mobilisation Forces (PMF) - have been in an armed standoff in the disputed city, located in northern Iraq.

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The escalating dispute comes in the wake of a controversial September 25 referendum on Kurdish secession, rejected as "unconstitutional" by Iraqi Prime Minister Haider al-Abadi.

Military analyst and Peshmerga Lieutenant Mohamed Saber told Al Jazeera that all-out war was unlikely at this time.

"He [al-Abadi] fears that if they wage a full-frontal war, many different sides will get involved and he will lose many of his supporters," Saber said.

"He realises that a war needs troops, funding, as well as mental support. Currently, Iraq is going through a very huge crisis economically, politically and regionally; it is not the time to declare war."

The country's Shia-dominated parliament has legislative power over such decisions. Saber said that Iran has been pressuring Abadi's government to launch a war against the semi-autonomous Kurdish region.

According to local media reports, Iran's elite Revolutionary Guard Corps has deployed a number of its troops to the south and west of Kirkuk.

Vast oil wealth

In Iraq, ethnic and tribal leaders have rallied many of the factions fighting in the ranks of the PMF. Fighters are either loyal to religious scholars, Iraqi political leaders, or Iran's Revolutionary Guards. Under al-Abadi, the PMF became a state-recognised armed group of predominantly Shia fighters.

Although al-Abadi had previously pledged not to wage war on the Kurds, on Monday, he directed Iraq's armed forces to "impose security in Kirkuk", in cooperation with the city's residents and Peshmerga forces.

Kurdish Peshmerga forces took control of oil-rich Kirkuk after the Iraqi army fled from a major offensive by the Islamic State of Iraq and the Levant (ISIL, also known as ISIS) group in 2014.

Since then, there has not been an agreement between the Kurdistan Regional Government (KRG) and the federal government in Baghdad about who should control the area - and benefit from its vast oil wealth.

The multi-ethnic city is home to about a million Arabs, Kurds, Turkmen and Christians. Deep animosity among many of Iraq's minority communities in the north dates back decades to the government's Arabisation campaign, aimed at shifting the country's demographics in favour of its Sunni population. The campaign displaced hundreds of thousands of minorities from northern Iraq, but thousands of Kurds returned to Kirkuk after the 2003 US-led invasion of Iraq.

'Standing in solidarity'

Hemin Hawrami, a senior assistant to KRG President Masoud Barzani, said that Peshmerga forces had been ordered "not to initiate any war, but if any advancing militia starts shooting", then they had the "green light to use every power" to respond.

"The Kurdish population is standing in solidarity with the Peshmerga forces in Kirkuk. Kirkuk has become a spiritual and national cause for us," Saber said. "We want to discuss the future of the region, but not with the central government's conditions of giving up the city and our will for independence. These are non-negotiable."

Kurds are the biggest minority in Iraq, comprising some 20 percent of the population. About six million Iraqi Kurds inhabit northern Iraq, and more than 78 percent of eligible voters voted overwhelmingly in favour of Kurdish secession last month.

Though the Iraqi constitution granted them autonomy in 2005, the central government has always strongly opposed the prospect of secession.

Mohammed Ali, a member of the KRG parliament, said that his government has been striving to return to the negotiating table.

"We've been calling for negotiation and collaboration with the central government in Baghdad, but unfortunately they continue to deny the results of the referendum," Ali told Al Jazeera.

"We believe that the referendum is a basic democratic right of our people. Our government is going to stay as they are, and we have to start negotiations right away."

Two sides deadlocked

Ali said that the Kurdish government was seeking talks without any preconditions, "but it seems like Baghdad has preconditions that are almost impossible [for us to accept]. They want us to give up everything in the Kurdistan region; that's not possible, and they know that it isn't possible."

Citing the central government's move to impose sanctions, including an international air embargo on the Kurdish region, Ali said it would be difficult to achieve a fair process for negotiations. According to the 2005 constitution, the central government was supposed to carry out a referendum on the disputed areas two years later, but that never happened, he said. "We have not been able to be good partners … but perhaps we could be good neighbours."

The Iraqi government, however, says it will only return to the negotiating table if the referendum results are annulled.

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Speaking from the Iraqi capital Baghdad, parliamentarian Ferdous al-Awadi of the Iraqi National Alliance told Al Jazeera that the central government did not want to declare war on the Kurdish region.

"The government wants to reinstate the constitution, which states that Peshmerga forces do not have the power to control the disputed area of Kirkuk," Awadi said.

"We're requesting that they return to their original designated borders … In 2014, in the fight against ISIL, they trespassed, and now they should return to their original borders as per the constitution. The Iraqi government can never, and will never, give up control of Kirkuk, its surrounding areas and its oil fields."

Middle East Forum analyst Aymenn Jawad al-Tamimi said that in the long run, the alternative to open conflict was for both sides to "return to negotiations over the future status of places like Kirkuk if the Kurdistan region seeks to become truly independent".

"The Kurdistan region at this point is economically and politically isolated," he said, referencing the regional and international backlash that followed the recent referendum.

"In the long run, both sides need to negotiate and make concessions if Kurdistan is going to have an amicable divorce from Iraq that ensures the Kurdistan area has a viable future as a functioning state."