The latest fighting took place in the Cudi mountains in Sirnak province where Cobra helicopters and artillery have been pounding Kurdistan Workers' Party (PKK) rebels since Monday, an army statement said.

Three soldiers were killed in the clashes, it said.

Troops were also chasing rebels in the eastern province of Bingol and the southern province of Hatay, near the border with Syria, after skirmishes a day earlier, the military said, without mentioning any casualties.

Turkey has massed up to 100,000 troops along its border with Iraq, according to media reports, as it threatens military strikes on PKK bases in the north of the country where, it says, the rebels enjoy safe haven and obtain weapons for attacks on Turkish soil.

Ankara also accuses Massud Barzani, head of the autonomous Kurdish regional government, of supporting the campaign the PKK has waged since 1984 for self-rule in Turkey's southeast.

"What they (Barzani and his followers) are doing there is quite simply harbouring a terrorist organisation," Erdogan said late Tuesday during a reception for Turkey's national day.

Reiterating that Ankara will talk only to Baghdad and not to the Barzani administration, Erdogan said his government is ready to use all available options to crush the PKK.

"If terrorist organisations encroach on Turkish territory, we will use all means available to us under international law," he said.

The government met to evaluate economic sanctions against Iraqi Kurdistan as recommended last week by Turkey's National Security Council, an influential consultative panel comprising top military and political leaders.

Possible measures include restricting trade with Iraq through the Habur border gate and cutting off electricity supplies to northern Iraq, press reports said.

Iraq is a lucrative market for Turkey and one of the few countries with which Ankara has a trade suplus.

Turkish exports to Iraq -- including construction materials, food, household appliances and electricity -- totalled 1.7 billion dollars in the first eight months of this year and 2.5 billion dollars for 2006, according to official figures.

Turkey's threat of a cross-border operation has led to unease in NATO ally Washington and the issue is expected to dominate Erdogan's talks with Secretary of State Condoleezza Rice in Ankara on Friday and with President George W. Bush at the White House on November 5.

Washington strongly opposes Turkish military action in northern Iraq as it battles an insurgency in the rest of the country.

Foreign Minister Ali Babacan, Defence Minister Vecdi Gonul and General Ergin Saygun, the deputy chief of the Turkish general staff, will accompany Erdogan on his US visit, Anatolia reported.

A ministerial meeting of Iraq's neighbours in Istanbul Saturday, which Rice and UN Secretary General Ban Ki-moon will also attend, is likely to be overshadowed by the tension between Ankara and Baghdad.

Iraqi Prime Minister Nuri al-Maliki appealed to Iran Wednesday to help defuse the crisis with Turkey, while Foreign Minister Hoshyar Zebari said the Istanbul conference must deal with Iraq's internal security rather than the row over PKK rebels.

"We hope that the Istanbul conference focuses on the security in Iraq," Zebari told a press conference with his Iranian counterpart Manouchehr Mottaki.

Tensions at the Turkish-Iraqi border increased after October 21 when PKK rebels, who Turkey says infiltrated from northern Iraq, ambushed a military unit, killing 12 soldiers and capturing eight.

The army says it has since killed 80 rebels on Turkish territory, including those announced Wednesday.