BAGHDAD, July 5 (Reuters) - Iraq has appealed to European backers of a hydroelectric project in Turkey to withdraw their support for the construction of a dam it believes will worsen an already dire shortage of water.

Turkey announced last week that it would resume work on the 1.2 billion euro ($1.68 billion) dam on the Tigris river, saying German, Swiss and Austrian underwriters would end a suspension on the project, renewing condemnation from downstream Iraq. "Building the Ilisu dam on the Tigris will impact the river and its farmers. There is a request from the Iraqi government to the countries funding this project to halt funding," government spokesman Ali al-Dabbagh told reporters on Saturday. In December, underwriters said they were halting work on the dam for 180 days because they said it did not meet global standards, but that period has now come to an end and Turkey plans to forge ahead.

Arid Iraq is in the second year of a major drought that has exacerbated entrenched problems for its environment and moribund farm sector. Pressure has been growing from Iraq's parliament and some camps within the Iraqi government to force Turkey to increase the amount of downstream water in the Euphrates river.

Resumption of work on Ilisu dam, which would provide 3.8 billion kilowatt hours of electricity a year and help wean Turkey from reliance on energy imports, is sure to fan the flames of that dispute.

The Tigris and Euphrates rivers both originate in Turkey and flow into Iraq, the latter passing first through Syria.

Turkey began work in 2006 on the project, which critics say will flood ancient sites and displace thousands of people.

If European backers pull funding, it is unclear whether Turkey would continue construction nonetheless. Austrian and Swiss creditors of the project are state owned, while Euler Hermes <ELER.PA> is majority-owned by Germany's Allianz <ALVG.DE>.

(Editing by Elizabeth Fullerton)

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