(Adds insurgents retake town south of Samarra)
* Workers evacuated as Iraqi forces battle to hold biggest refinery
* Insurgents stormed complex perimeter on Wednesday
* U.S. considers appeal for air strikes, some say Maliki must go
By Ghazwan Hassan
TIKRIT, Iraq, June 19 (Reuters) - Iraqi government forces battled Sunni militants for control of the country's biggest refinery on Thursday as Prime Minister Nuri al-Maliki waited for a U.S. response to an appeal for air strikes to beat back the threat to Baghdad.
The sprawling Baiji refinery, 200 km (130 miles) north of the capital near Tikrit, was a battlefield as troops loyal to the Shi'ite-led government held off insurgents from the Islamic State of Iraq and the Levant and its allies who had stormed the perimeter a day earlier, threatening national energy supplies.
Video aired by Al-Arabiya television showed smoke billowing from the plant and a black flag used by ISIL flying from a building. Workers trapped inside the complex, which spreads for miles close to the Tigris river, said Sunni militants seemed to hold most of the compound and that the security forces were concentrated around the refinery's control room. Iraqi security officials have denied that the plant was close to falling.
The 250-300 remaining staff were evacuated early on Thursday, one of those workers said by telephone. Military helicopters had attacked militant positions overnight, he added.
Baiji, 40 km (25 miles) north of Saddam Hussein's home city of Tikrit, lies squarely in territory captured in the past week by an array of armed Sunni groups, spearheaded by ISIL, which is seeking a new Islamic caliphate in Iraq and Syria. On Tuesday, staff shut down the plant, which makes much of the fuel Iraqis in the north need for both transport and generating electricity.
ISIL, which considers Iraq's Shi'ite Muslim majority as heretics in league with neighbouring, Shi'ite Iran, has led a Sunni charge across northern Iraq after capturing the major city of Mosul last week as Maliki's U.S.-armed forces collapsed.
The group's advance has only been slowed by a regrouped military, Shi'ite militias and other volunteers. But on Tuesday, Sunni fighters took the small town of Mutasim, south of Samarra, giving them the prospect of encircling the city which houses a major Shi'ite shrine. A local police source said security forces withdrew without a fight when dozens of vehicles carrying insurgents converged on Mutasim from three directions.
ISIL, whose leader broke with al Qaeda after accusing the global jihadist movement of being too cautious, has now secured cities and territory in Iraq and Syria, in effect putting it well on the path to establishing its own well-armed enclave that Western countries fear could become a centre for terrorism.
The Iraqi government made public on Wednesday its request for U.S. air strikes, two and half years after U.S. forces ended the nine-year occupation that began by toppling Saddam in 2003.
Washington has given no indication it will agree to attack and some politicians have urged President Barack Obama to insist that Maliki goes as a condition for further U.S. help.
Within hours of Iraqi Foreign Minister Hoshyar Zebari making the request public, General Martin Dempsey, the chairman of the Joint Chiefs of Staff, avoided a direct answer when asked by senators whether Washington would accede to the Iraq request.
"We have a request from the Iraqi government for air power," Dempsey said. Asked whether the United States should honour that request, he answered indirectly, saying: "It is in our national security interest to counter ISIL wherever we find them."
U.S. officials, speaking on condition of anonymity, said the Iraqi request had included drone strikes and increased surveillance by U.S. drones, which have been flying over Iraq. However, targets for air strikes could be hard to identify.
Another hurdle to U.S. military engagement could be political pressure in Washington for Maliki to quit. Several leading figures in Congress have spoken out against the premier, whom Obama has urged to do more to overcome sectarian rifts.
"The Maliki government, candidly, has got to go if you want any reconciliation," said Dianne Feinstein, one of Obama's fellow Democrats, who chairs the Senate Intelligence Committee.
Republican senator John McCain backed military support but urged Obama to "make it make very clear to Maliki that his time is up".
If the Baiji refinery falls, ISIL and its allies will have access to a large supply of fuel to add to the weaponry and economic resources seized in Mosul and across the north.
An oil ministry official said the loss of Baiji would cause shortages in the north, including the autonomous Kurdish area, but that the impact on Baghdad would be limited - at around 20 percent of supplies - since it was served by other refineries.
Some international oil companies have pulled out foreign workers. The head of Iraq's Southern Oil Company, Dhiya Jaffar, said Exxon Mobil had conducted a major evacuation and BP had pulled out 20 percent of its staff.
He criticised the moves, as the areas where oil is produced for export are mainly in the Shi'ite south and far from the fighting.
Washington and other Western capitals are trying to save Iraq as a united country by leaning hard on Maliki to reach out to Sunnis, many of whom feel excluded by the Shi'ite parties that have dominated elections since the Sunni Saddam was ousted.
In a televised address on Wednesday, Maliki appealed to tribes, a significant force in Sunni areas, to renounce "those who are killers and criminals who represent foreign agendas".
But so far Maliki's government has relied almost entirely on his fellow Shi'ites for support, with officials denouncing Sunni political leaders as traitors. Shi'ite militia - some of which have funding and backing from Iran - have mobilised to halt the Sunni advance, as Baghdad's million-strong army, built by the United States at a cost of $25 billion, crumbles.
This week, Maliki fired four commanders for abandoning Mosul and said dozens of officers would be court martialled.
Like the civil war in Syria next door, the new fighting threatens to draw in regional neighbours, mustering along sectarian lines in what fighters on both sides depict as an existential struggle for survival based on a rift dating to the decades following Islam's foundation in the 7th century.
Iranian President Hassan Rouhani made the clearest declaration yet on Wednesday that the Middle East's main Shi'ite power, which fought a war against Saddam that killed a million people in the 1980s, was prepared to intervene to protect Iraq's great shrines, visited by millions of Shi'ite pilgrims annually.
He said many people had signed up to go to Iraq to fight, although he also said Iraqis of all sects were prepared to defend themselves: "Thanks be to God, I will tell the dear people of Iran that veterans and various forces - Sunnis, Shi'ites and Kurds all over Iraq - are ready for sacrifice."
Iraqi troops are holding off Sunni fighters outside Samarra. The fighters have vowed to carry their offensive south to Najaf and Kerbala, seats of Shi'ite Islam since the Middle Ages.
Saudi Arabia, the region's main Sunni power, said Iraq was hurtling towards civil war. Foreign Minister Prince Saud al-Faisal, in words clearly aimed at Iran and at Baghdad's Shi'ite rulers, deplored the prospect of "foreign intervention" and said governments need to meet "legitimate demands of the people".
Maliki's government has accused Saudi Arabia of promoting "genocide" by backing Sunni militants. Riyadh supports Sunni rebels fighting Syria's Iranian-backed government but denies aiding ISIL. The United Arab Emirates, a Saudi ally, recalled its ambassador from Baghdad and criticised what it called the sectarian policies of the Iraqi government. (Additional reporting by Raheem Salman, Ned Parker and Oliver Holmes in Baghdad; Writing by Ned Parker; Editing by Alastair Macdonald)
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