By Peter Graff

BAGHDAD, Nov 20 (Reuters) - A permanent commission will be established in Baghdad to coordinate U.S., Turkish and Iraqi efforts to fight Kurdish separatist guerrillas, a senior U.S. embassy official said on Thursday.

The three sides have agreed to hammer out details of the commission within 10 days. That means it should be up and running before Iraq takes control of its own air space when a U.N. Security Council resolution expires at the end of the year.

Turkey has long complained that Iraq is failing to curb Kurdistan Workers' Party (PKK) fighters who launch attacks against it from bases in northern Iraq. The issue has strained relations between the two neighbours, both key regional allies of Washington.

A U.S. embassy statement said the commission would coordinate the fight against rebels and exchange intelligence.

Some 40,000 people have been killed since 1984 when the PKK took up arms to carve out an ethnic homeland in southeast Turkey.

The Turkish military has stepped up air strikes and shelling of northern Iraq since a PKK raid in October killed 17 Turkish soldiers in southeastern Turkey.

The U.S. official said previous three-way talks had failed to take hold, but the latest effort was different because the Turks had agreed to recognise officials from Iraq's autonomous Kurdish region as part of the Iraqi delegation.

"The Turks acknowledge that the Iraqis are more capable of addressing this issue," he said.

"The Turkish public position is different from the Turkish private position. The Turks have seen action (by Iraq) and they acknowledge that."

Turkish officials have expressed concern that Iraq could try to obstruct air strikes when it takes control of its air space after the new year. But the U.S. official said Baghdad has not tried to block limited air strikes in the past.

"The Turks came here very concerned about how they are going to keep up their operations against the PKK," he said.

"As it is, the government of Iraq has chosen not to make an international incident over these actions. They, including the KRG (Kurdish regional government), realise that the PKK is a security threat to Iraq."

Washington and Baghdad officially call the PKK a terrorist group and say that Ankara has a right to defend itself. But they fear large scale Turkish action could destabilise northern Iraq.

(Editing by Michael Roddy)

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