Turkey's embattled Erdogan seeks wider powers for spy agency
* Proposals follow tighter controls on internet, courts
* Plans widen eavesdropping, data collection powers
* Obama urges policies "rooted in rule of law"
By Orhan Coskun
ANKARA, Feb 20 (Reuters) - Battling a corruption scandal, Turkish Prime Minister Tayyip Erdogan is seeking broader powers for his intelligence agency, including more scope for eavesdropping and legal immunity for its top agent, according to a draft law seen by Reuters.
The proposals submitted by Erdogan's AK Party late on Wednesday are the latest in what his opponents see as an authoritarian backlash against the graft inquiry, after parliament passed laws tightening government control over the Internet and the courts this month.
The bill gives the National Intelligence Organisation (MIT) the authority to conduct operations abroad and tap pay phones and international calls. It also introduces jail terms of up to 12 years for the publication of leaked classified documents.
It stipulates that only a top appeals court could try the head of the agency with the prime minister's permission, and would require private companies as well as state institutions to hand over consumer data and technical equipment when requested.
"This bill will bring the MIT in line with the necessities of the era, grant it the capabilities of other intelligence agencies, and increase its methods and capacity for individual and technical intelligence," the draft document said.
Erdogan's response to the corruption inquiry - purging thousands of officers from the police force and reassigning hundreds of prosecutors and judges - has raised concern in Western capitals, including Brussels, which fears the EU candidate nation is moving further away from European norms.
It has also shaken investor confidence in a nation whose stability over the past decade, following a series of unstable coalition governments in the 1990s, has been based on Erdogan's firm rule, helping send the lira to record lows last month.
U.S. President Barack Obama, speaking by telephone with Erdogan late on Wednesday for the first time since the scandal erupted, discussed a raft of regional issues but also stressed the importance of Turkey's domestic stability.
"The President noted the importance of sound policies rooted in the rule of law to reassure the financial markets, nurture a predictable investment environment, strengthen bilateral ties, and benefit the future of Turkey," a White House statement said.
The graft scandal, which erupted in December with the detention of businessmen close to Erdogan and three ministers' sons, poses one of the greatest threats of his 11-year rule.
He has cast it as an attempt to unseat him by a U.S.-based cleric with influence in the police and judiciary before local elections in March and a presidential race, in which he has long been expected to run, five months later.
The feud with powerful preacher Fethullah Gulen, a former ally who has denied orchestrating the corruption investigation, is centred around a struggle for influence over state institutions and has drawn in the MIT before.
In February 2012, Erdogan blocked an inquiry into intelligence chief Hakan Fidan that was his supporters saw as a challenge to his authority from a Gulen-influenced judiciary, in what was a turning point in his relations with the cleric.
With the police and judiciary purged and the new laws on the Internet, courts and intelligence agency, Erdogan appears to be gaining the upper hand - at the cost of further polarising the nation.
The judiciary bill, which is awaiting approval from President Abdullah Gul, will give the government more say in the naming of judges and prosecutors, while the Internet law will enable the authorities to block access to web pages within hours without a prior court order.
Social media and video sharing sites have been awash with alleged recordings of ministers, including Erdogan, and business allies, presented as proof of wrongdoing in the graft scandal. Reuters has been unable to verify their authenticity.
Riot police used tear gas to disperse protests against the Internet controls in Istanbul this month, while the judicial reforms led to fist fights in parliament.
Opposition newspaper Taraf said on Thursday that the MIT law would turn Turkey into an "intelligence state".
A ruling party official said the bill would be discussed by a parliamentary commission on Saturday and would be on the general assembly's agenda next week. The opposition is expected to challenge the bill, but the AK Party's majority means it is likely to pass and be sent for Gul's approval. (Additional reporting by Ece Toksabay in Istanbul and Tulay Karadeniz in Ankara; Writing by Nick Tattersall; Editing by Alistair Lyon)