The package seemed too good to be true for the al-Jabar family, poor Shiite Muslims (search) who could not afford their own home in Baghdad.

Saddam Hussein's regime offered them a four-bedroom apartment, complete with furniture and appliances, plus $30,000. All they had to do was go to Kirkuk, about 180 miles to the north.

Now their decision to relocate places them in the middle of a simmering ethnic conflict in an oil-rich region of northern Iraq.

Saddam's motives in moving Arabs to an area dominated by the restive Kurds (search) was a cornerstone of his campaign to change the region's ethnic and demographic composition.

When the al-Jabars arrived in Kirkuk 16 years ago, they saw dozens of Kurdish people being put in trucks and driven away.

By moving thousands of Arabs to northern Iraq and expelling native non-Arab Kurds, the Iraqi dictator hoped to gain a firmer grip on the area.

Now, with Saddam in U.S. custody, thousands of Kurds are returning to the region and especially to Kirkuk, a multiethnic city of 1.2 million where various ethnic groups now jockey for control.

At the same, many Arabs are abandoning homes built for them by the former regime and are moving either south or to nearby mixed-ethnic towns.

The Kurds, who were the majority in Kirkuk decades ago, say there can be no just solution to the status of the city if the Arabs who came during Saddam's rule are allowed to remain.

The U.S.-led Coalition Provisional Authority (search) opposes the repatriation of ethnic groups as a policy and says Iraqis ought to be free to live wherever they wish.

Najah al-Jabar, 40, is willing to leave Kirkuk — if he receives financial help.

"If they give me enough money to be able to get myself a house in Baghdad, I would be more than happy to leave," said al-Jabar, whose husband was in the army before he retired. "It was the housing crisis that brought us here."

Al-Jabar said she fears that the Kurds will someday throw her out of her apartment.

"I'm afraid to go to sleep at night lest they storm the house. They might blow us up," she said.

But she acknowledged that no Kurd has threatened her. Other Arabs say they too are afraid of Kurdish reprisals, and also say there have been no direct threats, only rumors.

"We see the slogans on walls," said Raad Seifi, 20.

Taboor a-Sadi, 64, a Shiite, has been here since 1989 because he did not have anywhere to live when he moved out of his brother's house.

Taboor prefers to stay put in Kirkuk.

"I am free to live wherever I choose," he said. "Kirkuk is an Iraqi city and I am an Iraqi citizen."

Fear and rumor — the legacy of decades of a dictatorship that discouraged independent thought and the free flow of information — seem to be behind much of the Arab fear.

Muhanad Sabah Naeimi, a 25-year-old unemployed Sunni who arrived seven years ago, insisted that Kirkuk belongs to Arabs rather than Kurds, whom he described as migrants from Europe.

"Kurds are from southern Europe," Naeimi said. "They came from Italy... This is a known fact."

In fact, historians believe the Kurds, a Muslim people who speak a language related to Persian, have lived in the Middle East for thousands of years.

In the 1980s, Saddam launched Operation Anfal (search) — a scorched-earth campaign against the Kurds that claimed as many as 182,000 Kurdish lives and flattened 4,000 villages. But some Arabs say accounts of the offensive are propaganda.

Sheik Ahmed Khalaf, a cleric in the Arab village of Bir Dahab, insisted that Saddam favored the Kurds because "they didn't serve in the army and didn't have to fight in wars."

Ahmed Abu Khomra protested angrily when asked about Saddam's oppression of the Kurds, insisting "Saddam didn't attack families and children."