IRAQI army sources claimed today that they had retaken control of the Baiji oil refinery 130 miles north of Baghdad from rebel militants. 

Islamic State in Iraq and the Levant (Isis) fighters had attacked Iraq’s biggest oil refinery after pounding it with mortars and machine guns for a week.

An official speaking from inside the refinery had claimed earlier that “the militants have managed to break in to the refinery. Now they are in control of the production units, administration building and four watch towers. This is 75 per cent of the refinery.” 

But government counter-terrorism spokesman Sabah Nouri insisted Iraqi forces were still in control and had killed 50-60 fighters and burned six or seven rebel vehicles after being attacked from three directions.

Foreign personnel had been evacuated on Tuesday, but local staff reportedly remained in place.

Baiji accounts for more than a quarter of the country’s entire refining capacity and its loss would seriously damage embattled Prime Minister Nouri al-Maliki’s credibility. 

Meanwhile, government forces have flown new air strikes on rebels advancing towards the capital Baghdad.

Fighting was also reported in the western city of Ramadi, where Isis fighters claimed they had made advances, with a number of police stations near the town of Hit going over to dissident tribes.

Further north, the Iraqi government said it had recaptured the citadel in the strategic town of Tal Afar, where the Isis rebels took control on Monday.

The government is battling to push back Isis and its allies in Diyala and Salahuddin provinces after they overran Iraq’s second city, Mosul, last week.

Mr Maliki vowed yesterday to “face terrorism” while insisting that Iraqi security forces that wilted under a major rebel offensive had suffered a “setback” but not a defeat.

“We will face terrorism and bring down the conspiracy,” the premier vowed in televised remarks.

He added: “Not every setback is a defeat,” in reference to the performance of Iraqi forces.

However, Mr Maliki has fired four army commanders for failing to halt the sweeping advance by Isis fighters. They included the top commander for Nineveh province.