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KITCHANGA, Congo (AP) — The scarlet-lettered flag flaps atop a lush green hill in an apparent declaration of ownership. Here, a rebel movement turned political party collects taxes, appoints local officials and even polices a border post.

These former rebels are accused of populating the land they have grabbed with thousands of people from neighboring Rwanda to form a mini-Tutsi state. The state-within-a-state is emerging in the shadow of Rwanda's genocide two decades ago, and is raising the specter of new violence in war-ravaged east Congo.

U.N. officials, legislators and traditional chiefs are already forming "pacification committees" to try and resolve the land conflicts.

"The situation is explosive," Jean Baumbiliya Kisoloni, vice president of the provincial assembly based in Goma, said of Masisi, one of the districts under the new flag. "I am not really optimistic that this can be resolved without conflict."

After more than half a million Tutsis and moderate Hutus were slaughtered in Rwanda, the Hutu perpetrators of the genocide fled to east Congo in 1994. They took control of much of the land now in dispute and wanted to declare it a "Hutuland" for their tribe. At least 54,000 Congolese Tutsis in the region fled to Rwanda.

Despite pressure from Tutsis, the Congolese government has not facilitated the return of the refugees from Rwanda.

That reluctance led a renegade Congolese Tutsi general named Laurent Nkunda to desert the army, along with thousands of fighters who say their parents in exile in Rwanda must come home. In a 2008 rebellion, Nkunda's Tutsi fighters overran the territory in east Congo, forcing army troops and U.N. peacekeepers to retreat right to the gates of the provincial capital, Goma.

Nkunda was arrested in 2009 under a hastily-cobbled peace accord between longtime enemies Rwanda and Congo, but his fighters were integrated into Congo's military. These fighters — known as the CNDP — have tripled the area under their control to include lucrative mines and tens of thousands of acres (hectares).

"What's going on here now is boiling under the surface, a calm before the storm, and when it explodes ...," Camilla Olson of Refugees International said, her voice trailing off.

In the mountaintop town of Kitchanga, a woman selling cheese looks around nervously when asked if there are any foreigners around. She looks at CNDP soldiers up the dirt road, then whispers fiercely: "They're all around us. Sometimes a dozen come, some days it's just three or four."

Asked how she knew they were foreigners, she said the new arrivals claimed to be coming home, but did not know the name of Mweso town 20 kilometers down the road and did not know what day to go to the big market held weekly at nearby Kachuga. She said they had to be Rwandans, coming to grab land in Congo.

In the peace agreement signed last year, Rwanda, Congo and the U.N.'s refugee agency vowed to repatriate the 54,000 Congolese Tutsi refugees registered with the U.N. in Rwanda. The CNDP says many more, as many as 100,000, are living in Rwanda outside refugee camps.

But Rwanda has stalled, and most recently put off a meeting to discuss the issue for three months. And the CNDP says it will not dismantle its "parallel administration" until the Congolese government fulfills its part of the peace accord by organizing the return of the refugees and giving Tutsis positions in the government.

Meanwhile, some 12,000 families — at least 60,000 people — are reported to have crossed the border from Rwanda in recent months, according to the provincial coordinator of the National Commission for Refugees, Laingulia Njewa. Along with the new arrivals have come thousands of cattle, colorfully dubbed "Cows Without Borders," leading extremists to warn of an invasion from old enemy Rwanda.

The exodus is so large that many of the newcomers might be not refugees but rather economic migrants, abandoning their tiny, overpopulated state in search of, literally, greener pastures. Rwanda's 10 million people are densely congregated at 980 per square mile compared to Congo's 60 million, who average 66 per square mile.

A report by Refugees International found that people from Rwanda are "attempting to pass themselves off as Congolese refugee returnees and arriving to areas under the protection of the CNDP, adding to the frictions that are rising."

The report found that large farms are being established in the area through heavy taxation and threats of violence to drive out land owners. It also said there were reports of armed herders in Masisi serving as a militia.

But those findings are disputed by Aloys Tegera, a Congolese Tutsi who is the director of the Pole Institute think tank based in Goma.

"These fears of an invasion from Rwanda are the fantasy of politicians," he said. "We walked for hours in the forest looking for this new wave of refugees and found not one."

Still, Karl Steinacker of the U.N. High Commissioner for Refugees has been unable to explain the origins of some "undocumented" people crossing from Rwanda. In addition, some 12,000 people who had been in a CNDP-controlled refugee camp in Masisi district also have gone missing, he said.

"They haven't crossed into Rwanda but they are not there any more," he said, implying the CNDP had settled them on grabbed land inside Congo.

The U.N. refugee agency has taken names of thousands of new arrivals from Rwanda but is unable to match them to names of refugees registered in Rwandan camps, he said.

Asked about the influx months ago, Information Minister Lambert Mende said officials would check the documents of new arrivals and repatriate any who proved not to be Congolese. But the government has not responded to several offers by the UN refugee agency to do a census of undocumented people.

Rwandans and Congolese have long crossed their shared border for political and economic reasons. In a manifesto published after his 2009 capture, former CNDP leader Nkunda said that without colonization, today's Congo would not exist and his Congolese home district would be part of Rwanda.

Belgian colonizers used Rwanda, a fraction the size of sprawling Congo, as a forced labor camp for Congo's mines and massive tea, coffee and timber plantations. Thousands of Rwandan Tutsis also came to settle in Congo after pogroms in 1958.

Yet this latest wave has prompted anxieties about a Rwandan invasion. A report from Tegera's institute says politicians are using the return of legitimate refugees to "unleash irrational fears and panic." The report said articles are being circulated with the intention of creating ethnic hatred against "the invaders."

Steinacker of the U.N. refugee agency said local mediation committees have had some small successes.

"But they are no match for the magnitude of the problem," he said.