* Kurdish PKK supporters want a peace deal with Turkey
* Refugees say ready to go home if rights respected
MAKHMOUR REFUGEE CAMP, Iraq, Sept 9 (Reuters) - Turkey brands them terrorists, but supporters of the rebel Kurdistan Workers Party (PKK) exiled in Iraq say all they want is to go home and have their rights as minority Kurds respected.
Makhmour camp, which sprang up a decade ago in a largely Kurdish area of Iraq's Nineveh province, houses 12,000 Kurdish refugees. They fled a war pitting the Turkish military against PKK guerrillas since 1984 that has killed some 40,000 people.
Such camps represent the festering problem Turkey and Iraq must solve if they are to bring lasting stability to a region that is among the world's richest in energy potential, but is plagued by sectarian war, political feuds and cross-border tensions.
Turkey has accused Iraq of failing to stop rebel attacks launched from its north. Iraq's Arab-led government, though keen to improve trade ties with Turkey, is mired in its own dispute with Iraqi Kurds and fears cracking down on the PKK might upset the country's fragile stability after years of war.
Despite Turkey's steps to relax Kurdish policies, the PKK's continuing struggle for an ethnic homeland gives refugees like those in Makhmour little reason to hope they can soon go home.
"The PKK are fighting for Kurdish people's rights," said Mubarak Jubrail, an unemployed 50-year-old. "We dream of going home but until there's a political solution, we can't."
Partly owing to European Union pressure, Turkey has begun to soften its policies towards Kurds after decades of denying their existence as an ethnic group and banning their language.
It has started restoring names of Kurdish villages and may soon allow sermons and university classes to be delivered in the Kurdish tongue. State TV now carries Kurdish broadcasts, although the language is still banned in parliament and in political campaigns.
Improving ties between Ankara and Iraq's largely autonomous Kurdish region culminated in an unprecedented meeting between Turkish President Abdullah Gul and Kurdistan Regional Government (KRG) Prime Minister Nechirvan Barzani in Baghdad in March.
For Turks, acknowledging the KRG has been taboo for fear of reigniting Kurdish passions for statehood on Turkish soil.
"THEY HAVE TO CHANGE"
Residents of Makhmour, a settlement of clay homes, satellite dishes and eucalyptus trees, are sceptical of Turkish Prime Minister Tayyip Erdogan's vows to restore cultural rights.
"Turkey can never contemplate another nation inside theirs," said Jubrail. "They want us to be Turkish, as if it's a choice. I was born Kurdish; I can't change. They have to change."
Haji Kachan fled his village in southeast Turkey in 1993 after the Turkish army surrounded and bombed it with mortars and tank shells, killing five fellow villagers, he said. It was punishment for refusing to provide informants on PKK activities.
"We want to go back, but there's nothing left to go back to. So many villages have been destroyed," the 29-year-old teacher said. "We support the PKK because they're standing up for us."
Turkey says it had to evacuate villages infiltrated by PKK militants blamed for killing Turkish troops and citizens. PKK rebels killed six Turkish soldiers in two attacks on Tuesday.
While Turkey drops some restrictions on Kurds, its campaign against the PKK has if anything intensified. Turkish war planes have bombed PKK positions in northern Iraq repeatedly this year. Last year, it launched a ground invasion into northern Iraq.
The United States and European Union, both of which brand the PKK a terrorist group, back Turkey. Makhmour residents want the government to call a ceasefire and start peace talks.
"They have to come to a settlement or this war could go on for 200 years," said camp leader Abdul Karim Ahmed, whose office is adorned by a picture of jailed PKK leader Abdullah Ocalan.
This week, Turkey's military ruled out talks with PKK militants. Despite Turkish promises of fair treatment for PKK returnees, Makhmour residents fear arrest if they go home.
"Turkey must accept Kurds as having their own identity," said Ahmed. "Or there'll be no end to this war." (Editing by Mark Trevelyan)
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