By Isabel Coles
ARBIL, Iraq, Sept 21 (Reuters) - Iraqi Kurds went to the polls on Saturday to vote for a new parliament at a time when their oil-producing region is seeking greater autonomy from Baghdad, against a backdrop of violent instability in the rest of Iraq and the wider Middle East.
The Kurds have managed to insulate their region against the violence that afflicts the rest of Iraq, attracting investment from some of the world's largest companies, including ExxonMobil and Total.
In recent years, the Kurdish government has warned it is prepared to divorce Arab Iraq, and is now laying the final stretch of an oil export pipeline to Turkey that could in theory give the region the financial means to stand alone.
That has put the self-ruled region at odds with the Iraqi central government, which says it has sole authority to control the country's vast crude resources and wants power to remain centralised in Baghdad.
"The strategic stakes are extraordinarily high," said Ramzy Mardini at the Beirut-based Iraq Institute for Strategic Studies. "The 2013-2017 government in Arbil will be responsible for the most significant decisions for the Iraqi Kurds in a quarter century."
Iraqi Kurds take great pride in having held the country's first ever democratic election in 1992 after former dictator Saddam Hussein withdrew his forces from the northern enclave.
The political arena has since been dominated by two parties - the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK) - which share power having fought out their rivalries in a civil war during the 1990s.
The two ruling parties are widely expected to preserve their majority in parliament and continue their alliance, which would likely mean no major shifts in policy. President Masoud Barzani is leader of the KDP, and his nephew Prime Minister Nechirvan Barzani also belongs to the party.
The election comes after a month of feverish campaigning during which at least two people have been killed by stray bullets. Strings of flags festoon the streets and posters of aspiring parliamentarians are plastered on nearly every wall.
Meanwhile in the rest of Iraq, Sunni Islamist fighters and other militants have been regaining momentum in their insurgency against the Shi'ite-led government this years, pushing the level of violence to its highest since 2008.
Four suicide bombers stormed a police headquarters in a town north of Baghdad on Saturday, killing six officers, security sources said.
Upheaval in the Middle East is undermining assumptions about the political order that condemned Kurds to minority status in four countries including Syria, where civil war has allowed them to carve out their own territory in the northeast.
But in Iraqi Kurdistan, opposition had taken shape against corruption, authoritarian rule and lack of transparency, particularly around revenues from the region's oil. In 2009, part of the PUK broke away to form a new party, Gorran (Change).
Gorran took a considerable chunk out of the PUK's support base during the last election, and is now seeking to make further inroads to weaken the grip of the two ruling parties.
The PUK was dealt another blow last December when its leader Jalal Talabani, who is also president of Iraq, suffered a stroke and was flown abroad for medical treatment.
"As long as the KDP and PUK do well in the elections and their alliance holds strong, the status quo looks set to continue into the foreseeable future," said a source in the Kurdistan Regional Government on condition of anonymity.
"The opposition has posed a challenge ... for some time, but it hasn't proven to be a serious enough challenge." (Editing by Pravin Char)