Kurds voted in large numbers in an independence referendum in northern Iraq on Monday, ignoring pressure from Baghdad, threats from Turkey and Iran, and international warnings that the vote may ignite yet more regional conflict.

The vote organized by Kurdish authorities is expected to deliver a comfortable "yes" for independence, but is not binding. However, it is designed to give Masoud Barzani, who heads the Kurdistan Regional Government, a mandate to negotiate the secession of the oil-producing region.

Turnout among 5.2 million eligible voters was 78 percent, the Kurdish Rudaw TV station said, and vote counting had started. Final results are expected within 72 hours.

Voters were asked to say 'yes' or 'no' to the question: "Do you want the Kurdistan Region and Kurdistani areas outside the [Kurdistan] Region to become an independent country?"

For Iraqi Kurds - part of the largest ethnic group left stateless when the Ottoman Empire collapsed a century ago - the referendum offered a historic opportunity despite intense international pressure to call it off.

"We have seen worse, we have seen injustice, killings and blockades," said Talat, waiting to vote in the regional capital of Erbil, as a group of smiling women in colorful Kurdish dress emerged from the school showing their fingers stained with ink, a sign they had cast their ballot.

At Sheikh Amir village, near the Peshmerga front lines west of Erbil, long lines of Kurdish fighters waited to vote at a former school. Most emerged smiling, holding up ink-marked fingers.

In the ethnically mixed city of Kirkuk, Kurds sang and danced as they flocked to polling stations. Opposition to the vote simmered among the Arabs and Turkmen who live alongside the Kurds in the northern Iraqi city and there were rumors the vote would not take place in mixed areas. Officials later ordered an overnight curfew.

Iraqi Prime Minister Haider al-Abadi ordered security services "to protect citizens being threatened and coerced" in the Kurdish region, after unconfirmed reports that Arabs in a small town in eastern Iraq were compelled to vote yes. Kurdish officials say no such coercion happened.

The Kurds also say the vote acknowledges their contribution in confronting Islamic State after it overwhelmed the Iraqi army in 2014 and seized control of a third of Iraq. But with 30 million ethnic Kurds scattered across the region, mainly in Iraq, Iran, Turkey and Syria, Tehran and Ankara fear the spread of separatism to their own Kurdish populations.

President Recep Tayyip Erdogan said Turkey could cut off the pipeline that carries oil from northern Iraq to the outside world, piling more pressure on the Kurds. "After this, let's see through which channels the northern Iraqi regional government will send its oil, or where it will sell it," Erdogan said in Istanbul. "We have the tap. The moment we close the tap, then it's done."

The Iraqi army started "major maneuvers" with the Turkish army at the border, the Iraqi defense ministry said, outlining coordinated measures by the two countries against the Kurds in retaliation for the referendum. Turkey later took the Rudaw TV channel off its satellite service TurkSat, a Turkish broadcasting official told Reuters.

Asked about the referendum, White House spokeswoman Sarah Sanders said on Monday, "We hope for a unified Iraq to annihilate ISIS and certainly a unified Iraq to push back on Iran."

The U.S. State Department warned the Kurds last week that "holding the referendum in disputed areas is particularly provocative and destabilizing".

The referendum was held not only in the Kurdish autonomous region of Iraq, but also in areas in the north of the country where Kurdish forces have advanced against Islamic State. These areas also have large non-Kurdish populations.

Turkey said it did not recognize the referendum and would view its outcome as null and void, adding that the Iraqi Kurdish government was threatening the peace and stability of Iraq and the whole region. Prime Minister Binali Yildirim said his government was evaluating possible punitive steps regarding its border with northern Iraq and air space in response to the vote.

Erdogan said traffic was only being allowed to cross from the Turkish side of the border into Kurdish areas of Iraq. Ankara's forces are again fighting a Kurdish insurgency in Turkey following the collapse of a peace process.

Iran announced a ban on direct flights to and from Kurdistan on Sunday, while Baghdad asked foreign countries to stop direct oil trading with the Kurdish region and demanded that the KRG hand over control of its international airports and border posts with Iran, Turkey and Syria.

Major General Yahya Rahim Safavi, a top military adviser to the Supreme Leader Ayatollah Ali Khamenei, said Iran regarded the referendum as "treason" against the Iraqi Kurds. "Iran has blocked air traffic to this region but we are hopeful that the four neighboring countries will block the land borders with Iraq too," he was quoted as saying by state news agency IRNA.

Tehran supports Shiite Muslim groups who have been ruling or holding security and government positions in Iraq since the U.S.-led invasion which toppled Saddam Hussein in 2003.

Syria, embroiled in a devastating civil war and whose Kurds are pressing ahead with their own self-determination, rejected the referendum.

Iraqi Kurdish Prime Minister Nechirvan Barzani said he hoped to maintain good relations with Turkey and the referendum was not a threat to Ankara.

"The referendum does not mean independence will happen tomorrow, nor are we redrawing borders," he said in Erbil. "If the 'Yes' vote wins, we will resolve our issues with Baghdad peacefully."

Opposition to the vote emerged among non-Kurdish populations in areas disputed by the KRG and Baghdad, mainly the oil-rich region of Kirkuk.

"Iraq is against the Kurds, so are the Turks, the Iranians, the whole Arab region and Europe. They are going to live in a cage," said Mohammed Mahdi al-Bayati, a Shiite Turkmen and a local leader of the Iranian-backed Badr Organization paramilitary group in Tuz Khurmato, south of Kirkuk.

In Sulaimaniya, a center for political groups opposed to Barzani, lines at polling stations were shorter than in Erbil. There were fewer billboards celebrating the referendum, reflecting resentment that a 'yes' vote could be seen as a plebiscite for the Kurdish leader.

"I will not vote, the referendum is not good, and it could be dangerous because of the threat from Turkey and Iran," said a shop owner in Sulaimaniya, Ali Ahmed.</s>Recent developments in Iraq, with the Kurdish referendum for independence taking place as scheduled on Monday, put the Turkish government of Recep Tayyip Erdogan between a rock and a hard place. According to most recent press reports, more than 93 percent of voters approved the referendum for independence from Iraq, with about 282,000 votes counted. Ankara is talking tough but doesn’t have good options. Erdogan, as always, first cares about domestic politics. His de facto alliance with Turkish nationalists is critically important for electoral politics. The nationalist party in Turkey and the jingoist press are agitating against the Kurds. With one eye on the polls, Erdogan needs to maintain this conservative-nationalist alliance.

Presidential elections in Turkey are scheduled for 2019 but many analysts believe Erdogan will not wait that long. He is likely to opt for early elections in 2018 since economic dynamics that are now in his favor may deteriorate in the longer run. Despite respectable growth rates at the present, inflation, interest rates, and unemployment are on the rise. The likelihood of early elections and the imperative of nationalist populism at home requires tough talk against Kurds.

These domestic dynamics present a dilemma because the Kurdish Regional Government (KRG) in Iraq, led by Massoud Barzani, has been a good ally of Erdogan. In fact, many considered the KRG the only bright spot in Turkey’s otherwise deteriorating relations with neighbors. Barzani is against the PKK, the Kurdish insurgent group Turkey has been fighting against since 1984. Turkey’s war against the PKK has greatly intensified in the last couple of years since peace talks collapsed in 2015. The KRG is also an important supplier of oil to Turkey and a strong market for Turkish exports and construction companies. The landlocked Kurdish enclave in northern Iraq can ship as much as 700,000 barrels a day through the pipeline to Ceyhan on the Mediterranean. It is therefore not in Turkey’s economic and strategic interests to destabilize the KRG. Turkey even has a small military base in northern Iraq where Turkish troops train the Kurdish Peshmerga and provide support against the Islamic State (ISIS or IS).

Given such strong economic and military relations with the KRG, Erdogan hoped he could pressure and co-opt Barzani not to pursue the path to a referendum for independence. Yet, with his own political future at stake, Barzani did not cave and Erdogan now finds himself in a bind. It is under such circumstances that Ankara declared last week that it can “choose” to close the valves on Kurdish oil if the referendum takes place. Erdogan has also hinted at military action. Although the Turkish army is now conducting military exercises at the border, the threat of a Turkish invasion of the KRG lacks credibility.

In the absence of a military option, Turkey is likely to put economic and diplomatic pressure on the KRG, temporarily freezing economic relations and shutting border crossings with Iraq’s Kurdish region in both directions. In the meantime, Barzani will also probably try to calm nervous neighbors by indicating that independence remains a strategic objective rather than a fait accompli. In any case, the referendum in the KRG will not pave a smooth path to Kurdish independence. Baghdad, Tehran, Ankara, and Washington are all opposed to Kurdish independence. In practice, this means that the KRG will have to negotiate its way to more sovereignty from Baghdad. A major bone of contention in this endeavor will be the disputed oil-rich province of Kirkuk.

Iraq’s central government condemned the KRG for including Kirkuk in its referendum and has threatened to retaliate. In Baghdad, the parliament approved legislation ordering the closure of borders with the Kurdish region and the deployment of troops to areas under Kurdish control since the Islamic State offensive of 2014. Tehran has also reportedly closed its airspace bordering the Kurdish region, and the Iranian military is also conducting exercises in its frontier provinces.

With the overwhelming majority of Iraqi Kurds having voted in favor of independence, Barzani believes he has strengthened his hand against Baghdad. Yet, on top of galvanizing Arab nationalism in Baghdad, he has also antagonized Ankara, Tehran, and Washington. In addition to complicating the Arab-Kurdish alliance against IS, this was exactly why U.S. diplomats pressured him to postpone the vote. Time will show whether Barzani’s gamble will pay off. For now, Kurdish independence is still far away, and the KRG is facing an even more challenging regional environment.

Omer Taspinar is a nonresident senior fellow in the Center on 21st Century Security and Intelligence and an expert on Turkey, the European Union, Muslims in Europe, political Islam, the Middle East, and Kurdish nationalism. He is a professor at the National War College and an adjunct professor at Johns Hopkins University’s School of Advanced International Studies. Photo: Massoud Barzani (Wikimedia Commons).</s>Today, Iraqi Kurds will vote in a long awaited and widely condemned separatism referendum that is being boycotting by Arabs and Turkomen.

The referendum which has been condemned by all regional powers except for Israel as well as condemned by the UN, US, China and Russia, has already caused both Iran and Turkey to effectively shut down Iraqi airspace for all commercial flights over the region.

Today, both Iran and Turkey have been conducting large scale live-fire military drills in their respective regions bordering parts of Iraq unilaterally claimed by Kurds.

The no-fly zone over the area which will be policed by Iran and Turkey has been coordinated with the Iraqi government.

According to Keyvan Khosravi, the press secretary of Iran’s supreme national security conucil

Minutes ago, Turkey’s President Erdogan stated that he will use “all options” and take “necessary steps”. to safeguard Turkish security in Syria and Iraq. This is widely taken to mean that in respect of Iraq, Turkish troops may fully cross the border into Kurdish claimed territory.

Erdogan has also threatened to cut of oil flow from northern Iraq, saying,

“After this, let’s see through which channels the northern Iraqi regional government will send its oil, or where it will sell it,. We have the tap. The moment we close the tap, then it’s done”.

It looks increasingly likely that Turkey is preparing a full scale military intervention into the region, as I predicted in a recent piece in The Duran.</s>Kurds voted in large numbers in an independence referendum in northern Iraq on Monday, ignoring pressure from Baghdad, threats from Turkey and Iran, and international warnings that the vote may ignite yet more regional conflict.

The vote organized by Kurdish authorities is expected to deliver a comfortable "yes" for independence, but is not binding. However, it is designed to give Masoud Barzani, who heads the Kurdistan Regional Government, a mandate to negotiate the secession of the oil-producing region.

Turnout among 5.2 million eligible voters was 78 percent, the Kurdish Rudaw TV station said, and vote counting had started. Final results are expected within 72 hours.

Voters were asked to say 'yes' or 'no' to the question: "Do you want the Kurdistan Region and Kurdistani areas outside the [Kurdistan] Region to become an independent country?"

For Iraqi Kurds - part of the largest ethnic group left stateless when the Ottoman Empire collapsed a century ago - the referendum offered a historic opportunity despite intense international pressure to call it off.

"We have seen worse, we have seen injustice, killings and blockades," said Talat, waiting to vote in the regional capital of Erbil, as a group of smiling women in colorful Kurdish dress emerged from the school showing their fingers stained with ink, a sign they had cast their ballot.

At Sheikh Amir village, near the Peshmerga front lines west of Erbil, long lines of Kurdish fighters waited to vote at a former school. Most emerged smiling, holding up ink-marked fingers.

In the ethnically mixed city of Kirkuk, Kurds sang and danced as they flocked to polling stations. Opposition to the vote simmered among the Arabs and Turkmen who live alongside the Kurds in the northern Iraqi city and there were rumors the vote would not take place in mixed areas. Officials later ordered an overnight curfew.

Iraqi Prime Minister Haider al-Abadi ordered security services "to protect citizens being threatened and coerced" in the Kurdish region, after unconfirmed reports that Arabs in a small town in eastern Iraq were compelled to vote yes. Kurdish officials say no such coercion happened.

The Kurds also say the vote acknowledges their contribution in confronting Islamic State after it overwhelmed the Iraqi army in 2014 and seized control of a third of Iraq. But with 30 million ethnic Kurds scattered across the region, mainly in Iraq, Iran, Turkey and Syria, Tehran and Ankara fear the spread of separatism to their own Kurdish populations.

President Recep Tayyip Erdogan said Turkey could cut off the pipeline that carries oil from northern Iraq to the outside world, piling more pressure on the Kurds. "After this, let's see through which channels the northern Iraqi regional government will send its oil, or where it will sell it," Erdogan said in Istanbul. "We have the tap. The moment we close the tap, then it's done."

The Iraqi army started "major maneuvers" with the Turkish army at the border, the Iraqi defense ministry said, outlining coordinated measures by the two countries against the Kurds in retaliation for the referendum. Turkey later took the Rudaw TV channel off its satellite service TurkSat, a Turkish broadcasting official told Reuters.

Asked about the referendum, White House spokeswoman Sarah Sanders said on Monday, "We hope for a unified Iraq to annihilate ISIS and certainly a unified Iraq to push back on Iran."

The U.S. State Department warned the Kurds last week that "holding the referendum in disputed areas is particularly provocative and destabilizing".

The referendum was held not only in the Kurdish autonomous region of Iraq, but also in areas in the north of the country where Kurdish forces have advanced against Islamic State. These areas also have large non-Kurdish populations.

Turkey said it did not recognize the referendum and would view its outcome as null and void, adding that the Iraqi Kurdish government was threatening the peace and stability of Iraq and the whole region. Prime Minister Binali Yildirim said his government was evaluating possible punitive steps regarding its border with northern Iraq and air space in response to the vote.

Erdogan said traffic was only being allowed to cross from the Turkish side of the border into Kurdish areas of Iraq. Ankara's forces are again fighting a Kurdish insurgency in Turkey following the collapse of a peace process.

Iran announced a ban on direct flights to and from Kurdistan on Sunday, while Baghdad asked foreign countries to stop direct oil trading with the Kurdish region and demanded that the KRG hand over control of its international airports and border posts with Iran, Turkey and Syria.

Major General Yahya Rahim Safavi, a top military adviser to the Supreme Leader Ayatollah Ali Khamenei, said Iran regarded the referendum as "treason" against the Iraqi Kurds. "Iran has blocked air traffic to this region but we are hopeful that the four neighboring countries will block the land borders with Iraq too," he was quoted as saying by state news agency IRNA.

Tehran supports Shiite Muslim groups who have been ruling or holding security and government positions in Iraq since the U.S.-led invasion which toppled Saddam Hussein in 2003.

Syria, embroiled in a devastating civil war and whose Kurds are pressing ahead with their own self-determination, rejected the referendum.

Iraqi Kurdish Prime Minister Nechirvan Barzani said he hoped to maintain good relations with Turkey and the referendum was not a threat to Ankara.

"The referendum does not mean independence will happen tomorrow, nor are we redrawing borders," he said in Erbil. "If the 'Yes' vote wins, we will resolve our issues with Baghdad peacefully."

Opposition to the vote emerged among non-Kurdish populations in areas disputed by the KRG and Baghdad, mainly the oil-rich region of Kirkuk.

"Iraq is against the Kurds, so are the Turks, the Iranians, the whole Arab region and Europe. They are going to live in a cage," said Mohammed Mahdi al-Bayati, a Shiite Turkmen and a local leader of the Iranian-backed Badr Organization paramilitary group in Tuz Khurmato, south of Kirkuk.

In Sulaimaniya, a center for political groups opposed to Barzani, lines at polling stations were shorter than in Erbil. There were fewer billboards celebrating the referendum, reflecting resentment that a 'yes' vote could be seen as a plebiscite for the Kurdish leader.

"I will not vote, the referendum is not good, and it could be dangerous because of the threat from Turkey and Iran," said a shop owner in Sulaimaniya, Ali Ahmed.</s>Today, Iraqi Kurds will vote in a long awaited and widely condemned separatism referendum that is being boycotting by Arabs and Turkomen.

The referendum which has been condemned by all regional powers except for Israel as well as condemned by the UN, US, China and Russia, has already caused both Iran and Turkey to effectively shut down Iraqi airspace for all commercial flights over the region.

Today, both Iran and Turkey have been conducting large scale live-fire military drills in their respective regions bordering parts of Iraq unilaterally claimed by Kurds.

The no-fly zone over the area which will be policed by Iran and Turkey has been coordinated with the Iraqi government.

According to Keyvan Khosravi, the press secretary of Iran’s supreme national security conucil

Minutes ago, Turkey’s President Erdogan stated that he will use “all options” and take “necessary steps”. to safeguard Turkish security in Syria and Iraq. This is widely taken to mean that in respect of Iraq, Turkish troops may fully cross the border into Kurdish claimed territory.

Erdogan has also threatened to cut of oil flow from northern Iraq, saying,

“After this, let’s see through which channels the northern Iraqi regional government will send its oil, or where it will sell it,. We have the tap. The moment we close the tap, then it’s done”.

It looks increasingly likely that Turkey is preparing a full scale military intervention into the region, as I predicted in a recent piece in The Duran.</s>Traditional Middle East rivals Iran and Turkey have found themselves united of late by their mutual opposition to Kurdish independence in Iraq and common interest in ending the six-year war in Syria, among other leading issues in the region.

Iranian President Hassan Rouhani and Turkish President Recep Tayyip Erdogan spoke Sunday by phone, expressing major concerns a day before voting opened in the northern Kurdish autonomous region of neighboring Iraq. Monday's referendum, in which the region's residents are largely expected to ask for full independence from Baghdad, has been met with widespread criticism from Iraq's central government, as well as from Iran and Turkey, which have battled insurgencies from their own local Kurdish populations and have taken countermeasures to quell potential instability the vote could bring.

Related: Next Middle East war? Kurdish referendum brings hope and fears of new conflict to Iraq

"The two leaders noted that not canceling the referendum will bring with it chaos to the region and they also stressed the great importance which they attach to Iraq's territorial integrity," Erdogan's office said in a statement, according to Reuters.

Turkey had already begun conducting military exercises near its border with Iraq's majority-Kurd north and even said it launched an airstrike Saturday against militants from the Kurdistan Workers Party (PKK), who were preparing for an attack on Turkish troops from northern Iraq, Reuters reported. Erdogan threatened Monday to cut oil trade and send Turkish troops to invade the would-be Kurdish state, the Israeli daily Haaretz reported. As polls closed, Turkey and Iraq conducted "large-scale" joint military drills as a show of force, according to the Associated Press.

Shortly after, local media reported that Iran, too, may join the bilateral exercises. Iran launched its own military maneuvers Sunday to mark the 1980 invasion of Iran by the late Iraqi President Saddam Hussein and the subsequent eight-year war, according to Press TV, the English-language affiliate of the semi-official Islamic Republic of Iran Broadcasting outlet. The maneuvers have reportedly featured multiple airstrikes along Iraq's border with Iran.

Iran also closed its border with Iraq's Kurdish region Sunday and halted all flights there. While the intensity of Iran's domestic Kurdish insurgency has never reached the level of Turkey's, Iran also supports majority-Shiite Muslim Iraqi militias known collectively as the Popular Mobilization Forces, or Al-Hashd Al-Shaabi, whose influence and movement would likely be restricted as the result of an independent Kurdish state.

These fighters proved an effective force against the Islamic State militant group (ISIS) after the jihadists took over about half the country in 2014, and they even fought alongside Kurdish forces also battling ISIS. The militias are deeply opposed, however, to an Iraq divided between Iraqi Prime Minister Haider al-Abadi—an ally of both the U.S. and Iran—in Baghdad and Kurdish Regional Government President Masoud Barzani in Erbil, whose only steady international support has come from Israel, further offending local actors.

These Iran-backed militias retain a presence in disputed areas such as Kirkuk, whose inclusion in Monday's referendum has made the move even more controversial. As tensions brewed in the days leading up to the referendum, Qais al-Khazali, head of the Popular Mobilization Forces unit Asaib Ahl al-Haq, spoke out against the possibility of a Kurdish state.

"The enemies of Imam Hussein raised the flag of the homosexuals in Erbil at the wishes of the Israelis," Khazali said Saturday, referencing the seventh-century Islamic figure highly revered by Shiite Muslims for his refusal to pledge allegiance to the Umayyad caliphate, which he considered unjust and illegitimate.

"We will be victorious over anyone who wants to hurt or divide Iraq," he added, in a speech excerpt provided to Newsweek by Ahmad Majidyar, director of the Middle East Institute's IranObserved Project.

Iran and Turkey have also increasingly coordinated across the border in Syria, where they back opposing sides in a conflict that's killed hundreds of thousands of people and displaced millions. Iran, along with Russia, is a supporter of Syrian President Bashar al-Assad, while Turkey backs rebels trying to overthrow him since 2011. Opposition forces, with help from the U.S. and Gulf Arab states as well, made major gains early on in the war, but Assad and his allies have since regained much of what was lost.

A series of Syrian government victories and a rise in jihadist influence among rebel groups alienated international backers from the Syrian opposition and, as the Syrian military took Aleppo late last year, Turkey was forced to come to the table and make a deal with Russia and Iran. These negotiations, based in Astana, have since produced a framework for four de-escalation zones designed to provide refuge for civilians.

As Erdogan wrapped up a trip to Moscow to discuss Syria with Russian President Vladimir Putin, Turkish Prime Minister Binali Yildirim announced Monday that Turkey, Iran and Russia would work together to create a new de-escalation zone near the northern city of Afrin, which is under the control of the U.S.-backed Syrian Democratic Forces, a mostly Kurdish alliance of Arabs and ethnic minorities planning their own push for greater autonomy. U.S. support for Kurds, especially in Syria, has angered Turkey, a NATO partner.

"We are now taking joint moves with Iran and Russia to establish a de-escalation zone in the area of the Syrian city of Afrin in the north of the country," Yildirim said, according to the state-run Tass Russian News Agency.

Iran and Turkey have united against a third foe, Saudi Arabia. Persian Gulf rivals Iran and Saudi Arabia have been engaged in a proxy war throughout the region for decades. Saudi Arabia cut off relations with Iran completely early last year after Iranian demonstrators outraged by Riyadh's execution of an influential Shiite Muslim cleric stormed the Saudi Arabian embassy in Iran. It was when Saudi Arabia severed ties with neighboring Qatar earlier this year, however, that Turkey stepped in.

Shortly after President Donald Trump returned from an anti-Iran rally in the oil-rich kingdom, Saudi Arabia and allies Bahrain, Egypt and the United Arab Emirates announced in June a total boycott of Qatar over alleged ties to both Shiite Muslim groups tied to Iran and ultraconservative Sunni Muslim groups. Qatar denied the charges, leading Turkey and Iran to defy the Saudi-led blockade to deliver aid. Turkey also held military exercises on its only foreign military base, located in Qatar.</s>* Gold trade seen less than last year

* More Turkish banks seen working with Iran (Adds quotes, Halkbank, background)

ANKARA, Nov 29 (Reuters) - Gold trade between Turkey and Iran will resume, albeit at lower levels than last year, once sanctions on Iran are eased, Iran’s ambassador to Turkey said on Friday.

Turkey’s gold trade with Iran boomed in 2012 when Ankara was paying for its natural gas and oil imports with Turkish lira and Iranians were using those deposits held in Turkey’s Halkbank to buy gold.

“Certainly the gold trade between Iran and Turkey will resume,” the ambassador, Ali Reza Bigdeli, told reporters in the Turkish capital on Friday.

“Due to the problems in money transfers in 2012, the gold trade rose. I don’t think that we are still in the same situation that would require us to trade in gold in those amounts,” he said.

Some of the gold was held inside Turkey in the peak of the trade, while some was taken to Dubai by couriers to be sold for foreign currency which was much needed by Iran and to which it did not have access due to tight Western sanctions.

This trade had dried up as a provision of U.S. sanctions, made law in the summer of 2012 and implemented from Feb. 6, effectively tightened control on sales of precious metals to Iran and prevented Halkbank from processing oil payments by other countries back to Tehran.

“There are a lot of areas between Iran and Turkey that we could trade, we should revive those too,” Bigdeli said.

He also said Halkbank will maintain an important role in relations between Ankara and Tehran and that other Turkish banks are expected to work with Iran as risks ease. (Reporting by Tulay Karadeniz; Writing by Humeyra Pamuk; Editing by Daren Butler and William Hardy)</s>UPDATE: This story was updated on Tuesday, Sept. 26, at 12:10 p.m.

Setting aside years of increasing Turkey-US hostility, President Trump’s introductory remarks for the cameras were glowing as he met Turkey’s controversial President Recep Tayyip Erdoğan one-on-one last week, winding up a flurry of bilateral diplomacy on the sidelines of the UN General Assembly’s annual opening in New York.

Mr. Erdoğan is “running a very difficult part of the world,” Trump said Thursday, “and frankly, he’s getting very high marks.”

Recommended: Think you know Turkey? Take our country quiz.

“We have a great friendship as countries. I think we’re, right now, as close we have ever been,” he added, also extolling the leaders’ personal rapport.

But seen from Turkey, the picture is far different. The scuttling of a US weapons sale last week for Erdoğan’s presidential security detail was just the latest point of friction feeding Turkey’s disillusion with the US and its NATO allies – and one more reason for its deepening embrace of two historic rivals, Russia and Iran.

Mutual US-Turkey prodding of each other has become more and more frequent, as Erdoğan dabbles with a strategic realignment away from the US and Europe.

The US withdrew the license to sell $1.2 million in arms and ammunition for the security guards after a grand jury indicted 15 of them for assaulting a handful of anti-Erdoğan protesters in Washington in May.

Clearly peeved, Erdoğan groused that the US was refusing to sell weapons to a fellow NATO ally, while giving even more lethal arms for free – 3,000 truckloads worth, he said – to “terrorists.” He meant US-backed Kurdish forces in northern Syria fighting the so-called Islamic State. Turkey says it fears the US-supplied weapons may one day be turned against it.

Anti-Americanism has grown in Turkey, especially since Washington – the CIA in particular – was accused by some here of orchestrating a July 2016 coup attempt against Erdoğan.

But Turkey has also taken steps that have alarmed its NATO allies, including the recent announcement of a downpayment to Russia to buy the sophisticated S-400 air defense system, which is incompatible with NATO weaponry and would signal a deep partnership with the power that NATO was ostensibly created to contain.

Though Erdoğan met with Trump in New York, he is also hosting Russian President Vladimir Putin in Ankara this week, and is due in Tehran on Oct. 4 to discuss joint peace efforts with Iran in Syria. Until recently Turkey has pursued policies directly opposed to those of Russia and Iran. Turkey, Russia, and Iran currently are joint sponsors of a Syria peace process in Astana, Kazakhstan.

Erdoğan’s meetings follow high-ranking military exchanges, including Iran’s chief of staff of the armed forces Mohammad Bagheri making an unusual trip to Ankara in August, followed by Russia’s top general, Valery Gerasimov.

Nevertheless, despite the signals of change, analysts say Turkey’s deal with Russia may be primarily tactical, that Turkey’s foreign policy has been increasingly erratic and reactionary, and that Ankara is unlikely to jeopardize its role in the NATO security structure.

“Overall, [the S-400] is just one system and a rather symbolic one. But if you look at the prospects of Turkey and Russia really aligning their interests, they are very small, says Kristian Brakel, head of the Turkey office of the Heinrich Böll Foundation, a German political foundation associated with the Green Party.

“Turkey needs Russia, to have a seat at the table in Syria. Turkey needs Russia as some kind of bogeyman to show the Americans and Europe,” says Mr. Brakel. “But there are so many diverging interests, when it comes to Syria, when it comes to Crimea, the Black Sea. I think chances are really slim … that Russia could supplant NATO.”

“The current strategy – if there is any strategy – seems to be to diversify the options that Turkey has at its disposal,” adds Brakel.

Those options have grown in appeal since the coup attempt last year, after which Erdoğan and his ruling party castigated Washington and European capitals for the supposed lack of their swift support to “defend democracy.” Seen from the West, however, the wave of 50,000 arrests and purges of 150,000 from Turkish security and educational institutions that followed the coup have helped Erdoğan secure his hold on power. Later, hope faded in Ankara that Trump would prove to be far more pro-Erdoğan than President Obama, who took Erdoğan to task for his growing authoritarianism at home.</s>Turkey's Prime Minister Tayyip Erdogan addresses members of parliament from his ruling AK Party (AKP) during a meeting at the Turkish parliament in Ankara January 28, 2014. REUTERS/Umit Bektas

ANKARA (Reuters) - Turkish Prime Minister Tayyip Erdogan visited Iran on Wednesday to bolster trade and energy ties, state TV said, in what also looked like a bid to defuse tensions over Syria by capitalizing on Tehran’s diplomatic opening to regional rivals and the West.

Iran has been a strong strategic ally of Syrian President Bashar al-Assad since the start of the uprising against him, while Turkey has been one of his fiercest critics, supporting his opponents and giving refuge to rebel fighters.

But Iran’s election last June of President Hassan Rouhani, a relative moderate who says he wants to thaw its ties with the West, and shared concern over the rise of al Qaeda in Syria, have spurred hopes of a Turkish-Iranian rapprochement.

While deep divisions remain between Ankara and Tehran over the conflict in Syria, diplomats and government officials say both sides want to mend a relationship that could be pivotal to the fast-changing political map of the Middle East.

The United States believes detente between Turkey and Iran is important to wider stability in the Middle East, a strategic breakthrough Washington hopes to achieve from talks that world powers are pursuing with Tehran to curb its nuclear program.

Erdogan met Iranian Supreme Leader Ayatollah Ali Khamenei as well as Rouhani, whose foreign policy of “prudence and moderation” has eased Tehran’s international isolation and revived contact with longtime arch-enemy Washington.

“Our relations with Turkey have entered a new phase and we hope this trend continues. Besides serving the interests of the two countries, we hope our dialogue (with Turkey) serve regional interests as well,” Iranian Foreign Ministry spokeswoman Marzieh Afkham told reporters in Tehran.

“As two neighbors and Muslim countries, Iran and Turkey enjoy many commonalities and many cooperation opportunities.”

Analysts said the main focus of Erdogan’s visit was expanding economic cooperation, finessing any political disputes for now. “Considering that the economy and energy ministers are accompanying Erdogan, we can say this trip is business-targeted,” said Tehran-based analyst Hossein Foroughi.

Erdogan signed three trade deals on Wednesday before leaving Tehran to fly home, Iranian state television said.

“Today we had a good chance to review bilateral ties,” Erdogan said in remarks translated into Farsi by Iranian television as it showed him meeting Vice President Eshaq Jahangiri.

“I would like to mention specifically, and to express my satisfaction with, the agreement we signed in the preferential trade field,” he said. “It is obvious that we import from Iran crude oil and gas, which are strategic energy sources, and we (will be) able to increase the volume of these imports.”

No details were immediately released about the three trade pacts or Erdogan’s meetings with Khamenei and Rouhani, who plans to visit Turkey within the next few months, according to Iranian and Turkish media.

Erdogan’s delegation repeated Turkey’s demand for a discount on the price of natural gas from Iran, a senior Turkish official said. A senior Iranian official then told Reuters: “This issue was discussed but further talks will take place on the issue of discount. No decision has been made yet.”

Turkey depends on imports for almost all of its natural gas needs and the $60 billion energy bill Ankara must foot annually has been the biggest driver of its ballooning current account deficit, regarded as the main weakness of its economy.

Ankara deems Iranian gas too expensive compared with other suppliers like Russia and Azerbaijan, an assertion rejected by Tehran. Turkey’s Petroleum Pipeline Corporation applied to an international court of arbitration in 2012 for a ruling on Iran’s gas pricing. The case is still pending.

Turkey is keen to increase oil and gas imports from Tehran in anticipation of sanctions against Iran’s huge energy sector being dismantled in the wake of the November 24 deal between Tehran and six big powers under which the Islamic Republic committed to scaling back some of its controversial nuclear activities.

Some sanctions that were imposed over suspicions that Iran is covertly trying to develop a nuclear weapons capability, something it denies, were relaxed starting on January 20.

But most sanctions, including a severe squeeze on Iran’s access to the international financial system, remain in force pending a long-term agreement on the scope of Iran’s nuclear program, which is to be negotiated over the next six months.

But the potential of a market of 76 million people in Iran with some of the world’s biggest oil and gas reserves is a magnet for foreign investors, including Turkish companies.

“We hope the process will be finalized with an agreement that will ensure the removal of all sanctions on Iran. Turkey has so far done its best in that regard and will continue to do so,” Erdogan told reporters in Ankara before he flew to Tehran.

Iranian officials say trade between the countries stood at $22 billion (16.2 billion euros) in 2012, before dipping to $20 billion in 2013, and that it should reach $30 billion in 2015.

Iran was Turkey’s third largest export market in 2012. In fact, Iranian media said, Turkey exports more than 20,000 products to Iran, among them gold and silver.

The United States has been unhappy over continued trade with Iran by its Turkish ally sidestepping the sanctions regime, and has blacklisted some Turkish firms involved.

U.S. Treasury Under Secretary David Cohen, who visited Turkey just before Erdogan’s Iran trip, warned the Turkish government against any rapid improvement of trade and economic links with the Islamic Republic before a final nuclear agreement is struck, according to Turkish media.

“Businesses interested in engaging in Iran really should hold off. The day may come when Iran is open for business, but the day is not today,” Zaman newspaper quoted Cohen as saying.</s>* Focus on energy deals, but political rapprochement in air

* Tensions over support for opposing sides in Syrian war

* But common interest in countering al Qaeda in Syria

ANKARA, Jan 29 (Reuters) - Turkish Prime Minister Tayyip Erdogan has arrived in Iran to bolster trade and energy relations, state TV said, in what also looked like a bid to defuse tensions over Syria by capitalising on Tehran’s diplomatic opening to regional rivals and the West.

Iran has been a strong strategic ally of Syrian President Bashar al-Assad since the start of the uprising against him, while Turkey has been one of his fiercest critics, supporting his opponents and giving refuge to rebel fighters.

But Iran’s election last June of President Hassan Rouhani, a relative moderate who says he wants to thaw its ties with the West, and shared concern over the rise of al Qaeda in Syria, have spurred hopes of a Turkish-Iranian rapprochement.

While deep divisions remain between Ankara and Tehran over the conflict in Syria, diplomats and government officials say both sides want to mend a relationship that could be pivotal to the fast-changing political map of the Middle East.

The United States believes detente between Turkey and Iran is important to wider stability in the Middle East, a strategic breakthrough Washington hopes to achieve from talks that world powers are pursuing with Tehran to curb its nuclear programme.

Erdogan was to meet Iranian Supreme Leader Ayatollah Ali Khamenei as well as Rouhani, whose foreign policy of “prudence and moderation” has eased Tehran’s international isolation and revived contact with longtime arch-enemy Washington.

“Our relations with Turkey have entered a new phase and we hope this trend continues. Besides serving the interests of the two countries, we hope our dialogue (with Turkey) serve regional interests as well,” Iranian Foreign Ministry spokeswoman Marzieh Afkham told reporters in Tehran.

“As two neighbours and Muslim countries, Iran and Turkey enjoy many commonalities and many cooperation opportunities.”

Analysts said the main focus of Erdogan’s visit would be expanding economic cooperation, finessing the political disputes for now. “Considering that the economy and energy ministers are accompanying Erdogan, we can say this trip is business-targeted,” said Tehran-based analyst Hossein Foroughi.

Three trade deals were signed on Wednesday after Erdogan’s arrival, Iranian state television said, without elaborating.

“Today we had a good chance to review bilateral ties,” Erdogan said in remarks translated into Farsi and made during a meeting with Iranian Vice President Eshaq Jahangiri shown by Iranian television.

“I would like to mention specifically, and to express my satisfaction with, the agreement we signed in the preferential trade field,” he said. “It is obvious that we import from Iran crude oil and gas, which are strategic energy sources, and we (will be) able to increase the volume of these imports.”

Turkey is keen to increase oil and gas imports from Tehran in anticipation of sanctions against Iran’s huge energy sector being dismantled in the wake of the Nov. 24 deal between Tehran and six big powers under which the Islamic Republic committed to scaling back some of its controversial nuclear activities.

Some sanctions that were imposed over suspicions that Iran is covertly trying to develop a nuclear weapons capability, something it denies, were relaxed starting on Jan. 20.

But most sanctions, including a severe squeeze on Iran’s access to the international financial system, remain in force pending a long-term agreement on the scope of Iran’s nuclear programme, which is to be negotiated over the next six months.

Still, the post-sanctions potential of a market of 76 million people in Iran with some of the world’s biggest oil and gas reserves is a magnet for foreign investors, including Turkish companies.

“We hope the process will be finalised with an agreement that will ensure the removal of all sanctions on Iran. Turkey has so far done its best in that regard and will continue to do so,” Erdogan told reporters in Ankara ahead of his departure.

Iranian officials say trade between the countries stood at $22 billion (16.2 billion euros) in 2012, before dipping to $20 billion in 2013. It is expected to reach $30 billion in 2015.

Iran was Turkey’s third largest export market in 2012. In fact, Iranian media said, Turkey exports more than 20,000 products to Iran, among them gold and silver.

The gold trade boomed in 2012 when Ankara was paying for Iranian natural gas and oil imports with Turkish lira and Tehran was using those deposits held in Turkey’s state-run Halkbank to buy gold.

Some of the gold was held inside Turkey at the peak of the trade while some was taken to Dubai by couriers to be sold for foreign currency that was urgently needed by Iran as sanctions increasingly cut off access.

But the gold trade dried up under the chokehold of sanctions on precious metals transactions with Iran, with Halkbank also unable to process oil payments by other countries back to Tehran.

The United States has been unhappy over continued trade with Iran by its Turkish ally sidestepping the sanctions regime, and has blacklisted some Turkish firms involved.

U.S. Treasury Under Secretary David Cohen, who visited Turkey just before Erdogan’s Iran trip, warned the Turkish government against any rapid improvement of trade and economic links with the Islamic Republic before a final nuclear agreement is struck, according to Turkish media.

“Businesses interested in engaging in Iran really should hold off. The day may come when Iran is open for business, but the day is not today,” Zaman newspaper quoted Cohen as saying. (Editing by Mark Heinrich)
Iran and Turkey have vowed that there may be military aggression if the result is independence.