Gunfire erupted yesterday as hundreds of protesters marched in Kirkuk and at least two people were reported killed in the oil-rich northern city where plans for a new democratic Iraq are dividing Kurd, Arab and Turkmen residents.

Police Col. Salem Taha said two protesters were killed and 16 were wounded in the shooting. A reporter saw six people hit by gunshots, and heard sirens as ambulances rushed to the rescue.

Witnesses fleeing the scene said police opened fire on the crowd, but police said the shots came from members of the Patriotic Union of Kurdistan, as demonstrators tried to converge on that party's office.

US soldiers moved in with tanks to barricade the area and set up checkpoints at major intersections.

Hundreds of Arabs and Turkmen began protesting Wednesday morning to demand that Kirkuk remain under a central Iraqi government and not be incorporated into any proposed Kurdish federation.

"Kirkuk is an Iraqi city!" protesters shouted. "Down with federalism."

The exact division of the population of Kirkuk is not known. It is believed that residents are divided equally between three ethnic groups Arabs, Turkmen and Kurds.