Iraq - U.S. Defense Secretary Robert Gates said during a visit to Iraq on Tuesday that the withdrawal of U.S. combat troops from urban bases was paying off as Iraqi forces assumed the lead for the fragile security.

Gates is expected to touch on possible arms sales during his visit and try to help bridge a deep divide between ethnic Kurds and Arabs that many fear may undermine security gains.

Nobody's the boss or the occupier, or however you want to put it. But there's a real sense of empowerment by the Iraqis, Gates said of U.S.-Iraqi cooperation following the June 30 deadline for pulling U.S. combat troops out of city bases.

The withdrawal, a milestone in the plan to pull out all U.S. troops of Iraq by the end of 2011, raised fears among some Iraqis that untested local forces would not be able to keep Iraq from sliding back into greater bloodshed.

Less than a month into it, I'm really heartened, Gates told reporters after addressing U.S. troops at the dusty, sun-baked Tallil air base on a sweltering summer day.

He said Iraq's security situation was amazingly different to that of his first visit to Iraq as U.S. Defense chief in December 2006, at the height of the sectarian bloodshed that has killed tens of thousands of Iraqis since the 2003 invasion.

Gates met Iraqi Prime Minister Nuri al-Maliki and was due to hold talks with Defense Minister Abdel Qader Jassim.

He will visit the largely autonomous northern Kurdish region, which appears to be drifting farther from Arab leaders in Baghdad in an impasse over oil and disputed land, and is expected to meet Kurdish President Masoud Barzani.

Kurds vow to pursue their claims of areas like oil-producing Kirkuk as they assert greater control over hydrocarbon reserves.

The United States wants to prevent any clashes that might play into the hands of Sunni insurgents who would style themselves a bulwark against Kurdish encroachment.

We're very much positioned now as kind of an honest broker, said a senior U.S. Defense official, speaking on condition of anonymity.


He said U.S. forces in northern Iraq were playing an important confidence-building role in Kurd-Arab disputes.

The Arab-Kurd dimension is probably the most pressing one at the moment in terms of the issues that really need to get dealt with to consolidate our security gains, he said.

Kurdistan held parliamentary and presidential polls this weekend that, despite an unprecedented opposition challenge, were not expected to oust the ruling powers.

Gates hopes to build on talks between Maliki and U.S. President Barack Obama in Washington seeking what both countries have called more normal ties as U.S. forces stand down.
Part of this is the billions of dollars Iraq is expected to spend on arms, and Baghdad's interest in Lockheed Martin Corp's F-16 multirole fighter jets. Iraqi officials have expressed interest in buying an initial squadron of 18 F-16s this year, with a goal to acquire as many as 96 through 2020.

We think it's a good idea that they go with a multi-role fighter -- that it be ours, the U.S. official said.

The U.S. Congress has already been told of potential arms sales to Iraq worth some $9 billion, including General Dynamics Corp's M1A1 tank, armed helicopters from either Boeing Co or Textron Inc, and Lockheed's C-130J cargo plane.

France, China and Russia are among countries that have sold Iraq arms in the past. Jassim told U.S. Defense officials at a Pentagon meeting last week that Iraq had conversations with other folks about multirole fighters, the U.S. official said.

(Editing by Missy Ryan and Alison Williams)