Iraq PM vows to 'face terrorism' as Kurds form government

Iraq's premier vowed Wednesday to "face terrorism" and insisted security forces had suffered a "setback" rather than defeat, as militants pressing a major offensive attacked the country's largest oil refinery.

The militants also seized three villages in north Iraq Wednesday, an Iraqi official said.

"We will face terrorism and bring down the conspiracy," Prime Minister Nuri al-Maliki vowed in televised remarks, adding that "we will teach (militants) a lesson and strike them."

The crisis threatens to carve up the country while the assault on the Baiji oil refinery early Wednesday will likely further spook international oil markets.

The attack on the refinery complex, in Salaheddin province north of Baghdad, was launched before dawn, according to a senior official and a refinery employee.

They said some tanks containing refined products caught fire and that the Iraqi security forces had suffered casualties.

Maliki's security spokesman, Lieutenant General Qassem Atta, later said that Iraqi forces had repelled the attack in fighting which left 40 militants dead. He did not mention security force casualties.

The refinery was shut down and most employees evacuated on Tuesday due to a drop in demand caused by the militant drive, which is being spearheaded by militants from the Islamic State of Iraq and the Levant (ISIL).

World oil producers have cautiously watched the unfolding chaos in Iraq, which currently exports around 2.5 million barrels of oil per day, but have stressed that the country's vast crude supplies, mostly in the south, are safe -- for now.

Fighting in Tal Afar

Further north, Iraqi security forces pushed into new areas of Tal Afar on Wednesday during heavy fighting with militants, a provincial councillor said.

The Shiite-majority town is located in Iraq's Nineveh province along a strategic corridor to Syria and has been the scene of fierce fighting between security forces and militants for days.

But militants gained ground elsewhere, with a senior police officer saying they had moved into the Shiite Turkmen area of Bashir in the northern province of Kirkuk early on Wednesday.

The insurgents also seized three villages in Salaheddin province during clashes with security forces and residents that left 20 civilians dead, a local official said.

The official named the villages as Albu Hassan, Birwajli and Bastamli.

After taking Mosul, militants captured a major chunk of mainly Sunni Arab territory stretching towards the outskirts of the capital.

Despite the early poor performance of the security forces, Pentagon spokesman Rear Admiral John Kirby said Iraqi troops, with help from Shiite volunteers, were "stiffening their resistance" around Baghdad.

Washington has already deployed an aircraft carrier to the Gulf, but President Barack Obama has insisted a return to combat in Iraq for US soldiers is not on the cards.

Secretary of State John Kerry has, however, said that drone strikes could be used.

British PM warns of 'plan to attack Britain'

British Prime Minister David Cameron warned Wednesday that militants making advances in Iraq and fighting in Syria were also planning to attack Britain.

"I'd disagree with those people who think this is nothing to do with us and if they want to have some sort of extreme Islamist regime in the middle of Iraq that won't affect us -- it will," Cameron told the House of Commons.

"The people in that regime, as well as trying to take territory, are also planning to attack us here at home in the United Kingdom."

At a news conference on Tuesday following talks with Chinese premier Li Keqiang, Cameron said that ISIL in Syria and now Iraq "is the most serious threat to Britain's security that there is today".

Cameron told parliament: "The estimates are now that this is a greater threat to the UK than the return of foreign jihadists or fighters from the Afghanistan or Pakistan region."

He said that "we've already stopped a number of people travelling, we've taken away passports", although he did not give any further details.

Iraq Kurds form government

Meanwhile, Iraq's autonomous Kurdish region formed a new government Wednesday after months of wrangling, with premier Nechirvan Barzani using the occasion to call for defending disputed northern territory.

"Today we announce the formation of the government in complicated circumstances," said Barzani, the nephew of the region's president.

The division of ministries was not immediately clear, but the government includes the Goran movement, which had been in opposition.

Previously, the government was formed by the historic duopoly of Barzani's Kurdistan Democratic Party and the Patriotic Union of Kurdistan of ailing Iraqi President Jalal Talabani.

Negotiations have run since regional parliamentary polls in September, as top parties vied for posts.

Barzani also said that: "As we needed (Kurdish unity) in the year 2003 to protect the gains of our people, today we need the same stance to protect the areas of Kurdistan outside the administration of the region."

Federal security forces have either withdrawn or been swept aside by militants in various parts of northern Iraq. That has left the way open for Kurdish troops to move in, but this has put them in the line of fire from militants.

On Wednesday, Kurdish regional president Massud Barzani called on retired fighters from the Kurdish peshmerga security forces to sign up again to "support the peshmerga forces and prepare for all possibilities."