(Adds new quote from Turkish foreign minister)

By Mussab Al-Khairalla

BAGHDAD, Oct 23 (Reuters) - Iraq, anxious to avert a Turkish military strike into its territory, pledged on Tuesday to rein in Kurdish separatists who are launching attacks on Turkey from northern Iraq.

Foreign Minister Hoshiyar Zebari, after crisis talks in Baghdad with his Turkish counterpart, Ali Babacan, said Iraq would restrict the movement of PKK rebels and target their funding.

It was not clear whether this would be enough to placate Turkey, which wants an end to cross-border attacks.

Turkish Prime Minister Tayyip Erdogan said Ankara was giving diplomacy a chance, but reminded Iraq that Turkey's parliament had given the mandate for a military incursion at any time.

"Right now we are in a waiting stance but Iraq should know we can use the mandate for a cross-border operation at any time," he told a joint news conference in London after talks with British Prime Minister Gordon Brown.

Zebari told Babacan that Iraq was ready to curb the PKK and halt their attacks.

"I assured the minister that the Iraqi government will actively help Turkey to overcome this menace," Zebari, himself a Kurd, told a news conference. "We will not allow any party, including the PKK, to poison our bilateral relations."

He said Iraq would send a security and political delegation to Turkey for more talks. "We will cooperate with the Turkish government, to solve the border problems and the terrorism that Turkey is facing through direct dialogue," he added.

Babacan later met Iraqi President Jalal Talabani -- also a Kurd -- and said Iraq had promised to "support Turkey in fighting terrorism". He said PKK fighters were terrorists just like insurgent groups fighting Iraqi and U.S. forces. "We cannot say there are good terrorists and bad terrorists," Babacan said.

Turkey's government says it will exhaust all diplomatic channels before launching any strike into northern Iraq to root out the PKK separatists, who killed at least a dozen Turkish soldiers in fighting at the weekend. The easing in rhetoric helped bring global oil prices down from record highs.

But Babacan said the Turkish people were losing patience and wanted action.

A military incursion into northern Iraq would destabilise Iraq's autonomous Kurdish enclave, the only region of the country that has seen relative stability and prosperity since U.S. forces overthrew Saddam Hussein in 2003.

Turkey has built up its forces along the border with Iraq in preparation for a possible attack on rebel bases, although Erdogan has pressed Iraq to curb the PKK first.

"If expected developments do not take place in the next few days, we will have to take care of our own situation," Erdogan said during a speech in Oxford, England, on Monday.

THREAT OF INVASION

Washington and Baghdad have been calling on NATO member Turkey to refrain from a major military push into Iraq.

U.S. President George W. Bush expressed "deep concern" on Monday about Kurdish rebel attacks and told Turkish President Abdullah Gul the United States would continue to urge Iraq's government to act against the PKK rebels, the White House said.

Bush also agreed with Maliki to work with Turkey to stop the PKK from carrying out attacks from Iraq.

Secretary of State Condoleezza Rice and Britain's visiting foreign secretary, David Miliband, said they had proposed a meeting in Istanbul next month of officials from the United States, Turkey and Iraq to discuss how to stop the attacks.

Iraq's Talabani said on Monday the PKK would announce a ceasefire. Later the guerrilla group said in a statement it was ready for peace if Ankara stopped its military offensive against Kurdish fighters. It made no mention of a ceasefire.

Erdogan is under public and military pressure to strike in Iraq against the group which has killed some 40 Turkish soldiers in the past month.

The Turkish military said 12 soldiers died in Sunday's fighting and 34 rebels had been killed in an army offensive backed up by helicopters and artillery over the past two days.

The pro-PKK Firat news agency said eight soldiers had been captured in the fighting. Turkey has denied any of its troops were captured, but confirmed eight soldiers were missing.

Turkey has deployed as many as 100,000 troops, backed by tanks, F-16 fighter jets and helicopter gunships along its border with Iraq.

Turkey buried the 12 dead soldiers on Tuesday. Television images of grieving mothers, wives and children added to the pressure on Erdogan to take action. Anti-PKK rallies have been staged in many towns and cities across the large Muslim country.

Turkey estimates 3,000 PKK rebels are based in Iraq. Ankara believes U.S. occupying forces in Iraq could, if they wanted, capture PKK leaders hiding in the Qandil mountains, shut down their camps and cut off supply routes and logistical support.

But Washington is hesitant because such moves could destabilise Iraq's Kurdish region and hurt the regional authority there if it looked as if it were siding with Turkey against Kurds.

(Additional reporting by Evren Mesci and Gareth Jones in Ankara)

AlertNet news is provided by