Refugees raced for the Iranian border as besieged PUK guerrillas pleaded for United States' help after their lines of defence crumbled under an assault by the Kurdistan Democratic Party (KDP), which captured Degala and then the town of Koi Sanjaq, in a matter of hours.
The PUK said: "Urgent and decisive help is needed. We call on the US- led coalition to move urgently to stop the Iraqi onslaught."
In Koi Sanjaq, a city of 80,000, more than 5,000 residents fled after learning of the fall of Degala. Koi Sanjaq is 65 miles north-west of Suleymaniyeh, the PUK's last remaining stronghold in Iraq. Commentators have been predicting that the KDP may call on Saddam Hussein to help it eject the PUK from the city, just as it did in Arbil 10 days ago.
KDP officials later confirmed that it had seized Koi Sanjaq in a telegram from its military command near Arbil.
The KDP denied Iraqi involvement, at least in Degala, and it was not clear if the Iraqis aided the capture of Koi Sanjaq. A KDP spokesman said: "There were no Iraqi soldiers involved, let alone tanks." Baghdad issued a firm denial of any involvement in yesterday's fighting.
Iraq said it fired anti-aircraft weapons at US and allied aircraft patrolling no-fly zones over its territory yesterday. The Iraqi fire missed and the planes fled, the official Iraqi News Agency said. Iraq made the same claim on Friday and Saturday.
US officials warned Saddam Hussein yesterday that he faces further attacks if he tries to repair military sites hit by US. missiles. At the same time they said that American forces are unlikely to intervene in the fighting.
General John Shalikashvili, chairman of the Joint Chiefs of Staff, said signs have been detected that President Saddam is trying to repair surface- to-air missile sites bombed by American cruise missiles last week."We have warned Saddam Hussein that any attempt to repair those sites or reinforce them will be taken very seriously, and he must understand the consequences of such an act," the general said.
The White House Chief of Staff, Leon Panetta, said that President Saddam would pay a price for further aggression in the north. But he said it was more likely that he would be hit again in the south, where the US has strategic alliances and oil interests.
"Rather than engage in tactical efforts in the north, it is much more important for us and much more important a message to Saddam Hussein to extract a strategic price." The US Defense Secretary, William Perry, said: "We should not be involved in civil war in the north. We should focus our actions where our interests are."
Mr Perry said most of the 40,000 Iraqi troops that moved on Arbil have returned south, although some remain in the area and "are still nearby and still dangerous". General Shalikashvili said he thought the number of Iraqis still in the safe haven was in the hundreds.