By Missy Ryan

BAGHDAD, Sept 10 (Reuters) - Officials from Iraq's central government and its autonomous Kurdistan region have set up a committee that aims to defuse mounting tensions over oil and territorial disputes, a senior official said on Wednesday.

Deputy Prime Minister Barham Salih said the working group had begun meeting several weeks ago with a mission to ease strains over the disputed city of Kirkuk, a stalled oil law, the role of Kurdish Peshmerga troops and other divisive issues.

"We know what the problems are," Salih told Reuters, "a whole host of issues that are at the moment creating tension."

"There is no denying that there are problems, there are tensions, and there are differences of attitude. The question is: how we manage those differences," added Salih, a Kurd.

The local government in Kurdistan has voiced frustration in recent months at what it sees as growing unilateralism by the government of Prime Minister Nuri al-Maliki in Baghdad.

Kurds, who make up less than a fifth of Iraq's mainly Arab population, have had a complex and often bloody history with Baghdad.

Killed by the thousands under Saddam Hussein, they have enjoyed virtual autonomy in their northern enclave since the first Gulf War in 1991. After Saddam was toppled in 2003, they became partners in the U.S.-backed Baghdad government.

Relations have been especially strained over Kirkuk, an oil-rich city that lies outside of Kurdistan but which Kurds see as their ancestral home.

The struggle for control of Kirkuk, which is also home to Arabs and ethnic Turkmen, has delayed local elections because lawmakers in Baghdad have failed to agree how the city would be treated under a new law needed to hold the vote.

The feud has raised fears violence may again erupt in Iraq just as bloodshed has dropped to its lowest level in four years.

"This link between the elections and Kirkuk was unfortunate," Salih said.

Tensions also flared over Khanaqin, an ethnically mixed town in Diyala province where Peshmerga troops had been stationed.

Kurdish officials objected when Baghdad ordered Iraqi troops to replace the Peshmerga as part of a push to pacify the restive province. Salih said the row was largely resolved after police were given primary responsibility for the town's security.

LEGAL AMBIGUITY

In a recent interview with the London-based Asharq al-Awsat newspaper, Kurdish President Masoud Barzani complained that Kurds had been marginalized by Baghdad in key security, economic and military matters, and asserted Kurdish rights in disputed areas.

"We refuse to be treated as second-class Iraqis... We have been on this land before those that now claim that they are more Iraqi than we are. We do not accept such outbidding."

Salih said the new group, meeting regularly with Maliki, would also seek to end an impasse over the national oil law, a draft of which was passed by the Iraqi cabinet in early 2007.

The law has been bogged down partly over whether Kurdistan will have the power to sign oil contracts on its own and who will control reserves there.

Also contentious is the status of oil contracts the Kurdish government has already signed, which Baghdad deems illegal.

Iraq, which has the world's third largest proven oil reserves, wants to cash in on its oil fields, and plans to sign a spate of lucrative contracts next year with foreign oil firms.

"This legal ambiguity is hurting all of us, all of Iraq, not just the (Kurdistan Regional Government)," Salih said. (Additional reporting by Wisam Mohammed; editing by Sami Aboudi)

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