"We see that common sense has started to slowly prevail in northern Iraq," Gul was quoted as telling reporters in Tbilisi ahead of a ceremony to lay the foundation of a railway linking Georgia, Azerbaijan and Turkey.

"They (Iraqi Kurds) are aware of the cost of failing to show the courage to stand against the PKK (Kurdistan Workers' Party rebels)."

Accusing Iraqi Kurds of aiding the PKK, Turkey has threatened to carry out a cross-border operation into northern Iraq to strike at PKK rebels using the region as a springboard for attacks on Turkish targets.

The Baghdad government and the regional Kurdish government in the north of the country have subsequently agreed to step up measures to curb the PKK, listed as a terrorist organisation by much of the international community.

Earlier this month, US President George W. Bush pledged to provide Turkey with real-time intelligence on the PKK, in a move largely seen as tacit US approval for limited cross-border Turkish strikes.

"We have to show our determination for an armed struggle against terrorism. The terrorist organisation should know that if it insists on weapons, it will get a response with weapons," Gul said.

His comments coincided with a warning by a top PKK commander that the group would create chaos in northern Iraq if the United States and the Iraqi Kurds help Turkey against the rebels.

"If we want we can create instability and place their interests in danger," Cemil Bayik told the Firat news agency, considered a PKK mouthpiece.

"Our position...is clear: we will resist. We will never surrender," he added.

More than 37,000 people have died since the PKK launched an armed campaign in 1984 for self-rule in Turkey's mainly Kurdish southeast.

Turkey has massed an estimated 100,000 troops and military equipment on the border with Iraq, complaining that neither the US nor Iraq have fulfilled pledges to curb the rebels.

Washington and Baghdad oppose any large-scale Turkish military action in northern Iraq, fearing it could destabilise the only relatively calm part of the war-torn country.