By Shamal Aqrawi

DASHT TAKH, Iraq, June 26 (Reuters) - Farouq Youhana fled car bombs and snipers in Baghdad to start a new life in a village in northern Iraq's autonomous region of Kurdistan.

Little did he know that within days he would hear Turkish shells being fired at separatist Kurdish rebels based just inside the Iraqi border.

"I came looking for security, but found myself living with this shelling. They do not hesitate to shoot without reason, to scare us," Youhana, 48, said in the small village of Dasht Takh.

Tensions have soared along the mountainous border region in recent weeks following an upsurge in attacks across Turkey that Ankara has blamed on the Kurdistan Workers Party (PKK).

Financial markets were rattled earlier this month by reports of a big military incursion into northern Iraq, which Turkey denied. Turkey's military is known to sometimes shell PKK targets inside Iraq, as well as stage small raids across the border.

Youhana and several other villagers said the shelling was making it too dangerous to work in the picturesque mountain region, where locals grow chickpeas, grapes and walnuts.

Tourists from larger towns in Kurdistan who visit to enjoy the mountains and river views were also staying away, they said.

One PKK fighter said the rebels were on high alert for any invasion, something analysts regard as unlikely given the strain it would put on Turkey's ties with Washington.

"We carry our weapons to defend ourselves ... (Turkey) prefers the military choice but we tell them that this will not solve the problem," Sherfan Azadi, clutching a rifle, told Reuters on the outskirts of one village.

Turkey's government is under pressure from the public and army to tackle some 4,000 rebels believed to be in northern Iraq and who seek to establish a Kurdish state in southeast Turkey. Tens of thousands of Turkish troops have been sent to the border.

Prime Minister Tayyip Erdogan last week called on the United States and Iraq to deal with the PKK in northern Iraq, saying Ankara would take military action if necessary.

Washington, while classing the PKK as a terrorist group, fears any major operation by its NATO ally in northern Iraq could anger Iraqi Kurdish allies and stoke wider conflict in a relatively peaceful region of the war-torn country.

POVERTY

Youhana grew up in Baghdad and owned a shop selling plumbing supplies. Dismayed by the unrelenting violence, he moved two months ago to Dasht Takh, where his father was born.

"I thought I could start a small project with my savings. But I found it impossible," he said.

While there have been no reports of anyone getting killed by the sporadic shelling, residents said they lived in fear.

Residents said they had nothing against the PKK, saying they only occasionally saw them. Most PKK fighters are believed to live in camps across the mountains, they said.

Some residents said it was unsafe to tend orchards around the nearby village of Sinat.

"We live in poverty because we cannot reach the orchards we own. I tried to go but the Turks fired at me," said Salim Micheal, 38, showing wounds to his hand that he said was caused by shrapnel from a Turkish shell.

Baghdad has sent a letter of protest to Ankara about what it said was intensive Turkish shelling of areas inside Iraq.

Foreign Minister Hoshiyar Zebari said this month that Turkey's concerns about the PKK were legitimate, but that his government had long shown its willingness to work with Ankara on ways to stop the rebels harming Turkish interests.

Ankara blames the PKK for the deaths of more than 30,000 people since it launched an armed campaign for autonomy in southeast Turkey in 1984.

To the south of the border, in the larger village of Sharnesh, Aqil Sabri owns a shop selling food and drinks. Tourists had stopped coming to enjoy the nearby river, he said.

"Spring and summer are the seasons of tourism, but this season will not be like previous years," he said.

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