Turkey, Iraqi Kurds see deeper ties after visit

ANKARA (Reuters) - Turkey seeks "full economic integration" with Iraqi Kurds and more co-operation in its fight against Kurdish rebels, Foreign Minister Ahmet Davutoglu said after talks with Iraqi Kurdish President Massoud Barzani.

Barzani's landmark visit to Turkey comes just as the armed Kurdistan Workers Party (PKK) said it was scrapping a year-old ceasefire against the Turkish state and resuming attacks.

"We expect full co-operation from all of our Iraqi brothers, especially the Kurdistan Regional Government, on this issue (of fighting the PKK)," Davutoglu said at a joint news conference.

"Northern Iraq is a bridge in the close relations between Turkey and Iraq, and we will carry out full economic integration between Turkey and northern Iraq," Davutoglu said.

Turkish companies, including conglomerates Cukurova and Dogan Holding, are already involved in oil production.

Davutoglu said the country's biggest banks, state-run Ziraat and Isbank would open branches in Arbil, the capital of Iraqi Kurdistan. Flag carrier Turkish Airlines will introduce a route from Istanbul to Arbil, he said.

Barzani is in Turkey for the first time since late 2003 after the U.S. invasion of Iraq in a landmark visit after years of mistrust between the neighbors has given way to burgeoning trade and security ties.

"We came to expand our relations with Turkey. We share many values, but there is more we can do together," Barzani said.

He also praised Prime Minister Tayyip Erdogan's efforts to address Turkish Kurdish grievances and expand cultural and political rights to try to end the 25-year war with the PKK that has claimed 40,000 lives, mainly Kurdish.

But the PKK, which is mainly based in the remote mountains straddling the borders of Iraq, Turkey and Iran, said the Turkish government has failed to make progress on political reforms. Continuing military operations against PKK targets also prompted the group to call off its unilateral truce, a spokesman said.

Barzani has been critical in the past about Turkish incursions across the border against the PKK. Last month, the Kurdistan government condemned an aerial bombardment by Turkey and Iran, saying it violated Iraqi sovereignty.

Turkey had until recently tried to isolate Iraqi Kurds, worried their autonomy would stoke separatism among its own estimated 15 million Kurds.

Erdogan's government now believes Turkey can wield greater influence in Iraq by boosting relations with the Kurds before the U.S. troop withdrawal in 2011, analysts said.

(Reporting by Tulay Karadeniz, writing by Ayla Jean Yackley)