Islamic State fighters battle Iraqi forces near Baiji refinery

(Reuters) - Islamic State insurgents battled Iraqi forces in the center of Baiji on Tuesday, a week after the army broke their prolonged siege of the country's largest oil refinery just outside the town, an army officer and residents said.

The renewed fighting in Baiji by the Islamist militants, who control thousands of square miles of territory in Iraq and Syria, appeared aimed at reimposing that stranglehold around the sprawling oil facility 2 miles (4 km) to the north.

Islamic State (IS) fighters were present in four of Baiji's 12 neighborhoods, as well as areas on the perimeter of the sprawling refinery complex. But the army controlled its southern approaches, preventing insurgents from surrounding it, according to a Baiji resident who toured the area.

On Monday an Islamic State video circulated on the Internet showing its fighters denying that they had been driven out of Baiji, and what purported to be two suicide truck bombings targeting the refinery defenses.

"Yes, they infiltrated some areas," one of the speakers said, referring to the Iraqi security forces. "But, God willing, either they will withdraw or they will be exterminated."

One resident of the town some 200 km (125 miles) north of Baghdad said IS gunmen launched an attack on Monday night in the center of Baiji, advancing into the town's Asri district. There had also been fighting in the Naft and Kahraba neighborhoods.

Around the refinery, IS insurgents still held a housing complex on its western edge and were digging trenches in the Makhmour hills overlooking the installation from the north, despite coming under fire from helicopters, the resident said.

To the east, he said, insurgents could be seen crossing the nearby Tigris river by boat.

Islamic State seized Baiji and surrounded the refinery during a June offensive when it swept south towards the capital Baghdad, capturing cities, farmlands and oilfields and meeting virtually no resistance from Iraq government forces.

Shi'ite militias and Kurdish peshmerga, backed by U.S.-led air strikes since August, have helped contain the radical Sunni insurgents and pushed them back in some provinces. But they have continued to make gains in the western Sunni province of Anbar.