SADDAM LOYALISTS SEIZE CITY : KURDISH FACTION STRIKES AGAIN IN NORTHERN IRAQ.

Byline: Douglas Jehl The New York Times

Thousands of Kurdish civilians and hundreds of armed guerrillas fled Kuysanjaq in northern Iraq Sunday as the Kurdish faction that has been backed by President Saddam Hussein's forces mounted an eastward offensive and overran the city.

Officials of a rival faction, the Patriotic Union of Kurdistan, which had controlled the city, said Sunday night that their forces had abandoned Kuysanjaq in the face of an overwhelming attack by the Kurdistan Democratic Party, which together with Iraqi troops captured the regional capital of Irbil eight days ago.

In Sulaimaniya, the PUK's last major stronghold, there was a mood of despair Sunday night. Officials of the losing faction accused their rivals of having once again employed Iraqi armor and artillery, and they and residents expressed fear that their rivals would now turn their sights on Sulaimaniya.

KDP officials and the Iraqi government denied that Iraqi forces had taken part in the assault Sunday.

Foreign aid workers who visited Kuysanjaq before it fell also said they had seen no evidence of Iraqi involvement.

Reporters who tried to reach the battle zone from the east were prevented from doing so by the KDP forces, and those who reached the area by a circuitous route were warned by the fleeing PUK fighters against trying to reach Kuysanjaq.

But it was evident at least that the KDP, led by Massoud Barzani, was capitalizing on its crushing victory a week ago to press its advantage against what are now clearly the fearful forces led by Jalal Talabani.

And on the defeated side there remained a conviction that their rivals' advance would consolidate a return of Saddam's control over the region, where the United States and its Western allies created a safe haven for the Kurds in 1991 after the Persian Gulf War.

``Today he has Kuysanjaq,'' said one fleeing guerrilla, Mohammed Ghareib. ``Tomorrow or the day after, he'll take Sulaimaniya. And then maybe we'll have to run all the way to Iran.''

The two Kurdish factions, longtime political rivals, agreed to share power when the United States and its allies created the safe haven. But as international attention waned, they began to fight over dwindling resources, and a bitter feud erupted over lucrative black market activities.

As the KDP forces advanced Sunday afternoon, the residents and then defenders of Kuysanjaq, a city of 50,000, took flight by car and cattle truck and on foot, climbing by road across a steep mountain range and seeking refuge here and in towns to the north.

At a crossroads called Bestana at the foot of the high ground, sweat-stained guerrillas still clutching their Kalashnikov rifles said they had no choice but to retreat as Barzani's forces mounted their attack, first overrunning Degala, 30 miles southeast of Irbil, then continuing toward Kuysanjaq itself.

Sulaimaniya, the last large city in the hands of Talabani's group, lies some 75 miles southeast of Kuysanjaq. There are few natural barriers between the cities.

Officials of the PUK noted with apprehension Sunday night that when Iraqi forces entered Sulaimaniya in 1991 to suppress a Kurdish uprising, their initial advance followed the same route as Sunday's offensive.

That Iraqi advance sent hundreds of thousands of Kurds fleeing into the mountains of Turkey and Iran, prompting the United States and its allies to undertake a military relief operation and to compel Iraq to withdraw its units.

Even Sunday, foreigners who work for several private aid organizations left Sulaimaniya out of concern over the Barzani faction's advance, and U.N. agencies based here decided to suspend their operations for at least two days.

The failure of the United Nations and the international community to respond forcefully to the fighting has angered many people here, some of whom staged demonstrations outside the local U.N. headquarters. As they traveled in the region Sunday, some U.N. guards found themselves the targets of verbal abuse, an international relief worker said.

``They are very apprehensive because of the Iraqis,'' the relief worker said about the local population. ``They think that if they come here, it is the end of the world.''