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Militants linked to Al Qaeda made gains in the Iraqi city of Ramadi, while Sunni tribesman joined forces with Iraqi forces to fight them.
Fallujah, once the fierce battleground between Iraqi troops and US forces, was reportedly captured by Al Qaeda on Friday.
Militants alligned with Al Qaeda raised its flag above government buildings and declared Fallujah an Islamic state.
"At the moment, there is no presence of the Iraqi state in Fallujah," a local journalist told The Washington Post. "The police and the army have abandoned the city, Al Qaeda has taken down all the Iraqi flags and burned them, and it has raised its own flag on all the buildings."
Violent clashes plagued the Iraqi city of Ramadi, which like Fallujah is located in Anbar province. Security officials said 32 civilians were killed across both cities on Friday.
While a senior leader of a militia claimed that Iraqi forces and allied tribesman had killed 62 Al Qaeda-alligned militants in Ramadi, a police captain said the militants had gained ground in central areas of the same city.
Sheikh Ahmed Abu Risha, senior leader of the Sahwa militia, told Agence France Presse that 16 members of the Al Qaeda-linked Islamic State of Iraq and the Levant (ISIL) were killed east of Ramadi, and another 46 were killed in the city itself.
Militants from ISIL have held parts of Ramadi and Fallujah in Anbar province for days, and a police colonel told AFP that ISIL still controlled a quarter of Fallujah.
Roots of violence a decade old
Both these Iraqi cities were insurgent strongholds and saw intense fighting during the 2003 American-led invasion. Nearly one-third of total US fatalities came from the fighting in Ramadi and Fallujah.
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The latest violence was sparked when Iraqi security forces demolished a Sunni Arab anti-government protest camp in Ramadi on Monday.
The protesters alleged that President Nouri Al-Maliki's Shia-led government marginalized Sunnis and targeted their communities.
New York-based Human Rights Watch called for a "transparent and impartial investigation" into the violence that killed 17 people on Monday.
"The facts of the Ramadi incident are unclear, but government statements before the clashes and the deployment of the army seemed intended more to provoke violence than prevent it," said Joe Stork, deputy Middle East director at Human Rights Watch.
Sunni tribesmen ally with security forces against Al Qaeda
Since then, the security situation has deteriorated with hundreds of Islamist insurgents — dressed in black and waving Al Qaeda flags — fighting Iraqi security forces and tribesmen with machine guns and anti-aircraft guns mounted on pick-up trucks.
The tribesmen, also Sunnis like the militants, fought alongside Iraqi security forces due to a deal cut with the Shia-led government on Thursday to fight Al Qaeda.
"There is no way to let Al Qaeda keep any foothold in Anbar," one tribal leader told Reuters. "The battle is fierce and not easy because they are hiding inside residential areas."
"Those people are criminals who want to take over the city and kill the community," said Sheikh Rafe'a Abdulkareem Albu Fahad, who is leading the tribesmen against ISIL in Ramadi.
Local tribes struck a similar deal with US troops in 2006 to drive out Al Qaeda forces.
Agence France-Presse and Reuters contributed to this report.