Babacan's remarks signalled a softening of the Turkish stance towards Iraqi Kurds. Ankara has accused them in past of harbouring militants of the separatist Kurdistan Workers' Party (PKK).

"We have had some differences... over the PKK terrorist organisation. But in the coming days, you can expect increasing contacts on various levels with the administration of northern Iraq," the Anatolia news agency quoted Babacan as saying.

Closer dialogue with the Iraqi Kurds "is important with respect to fighting the terrorist organisation (PKK) and also for our economic relations and energy cooperation with Iraq as a whole," the minister said.

The PKK, listed as a terrorist group by Ankara and much of the international community, has long used camps in the mountains of northern Iraq as a springboard for attacks on Turkish targets across the border.

Ankara has accused the Iraqi Kurds, who run autonomous northern Iraq, of tolerating the PKK and even supplying it with weapons and explosives.

Turkish warplanes have bombed PKK positions in northern Iraq since mid-December. In February, the army conducted a week-long ground offensive against the rebels, drawing protests from Iraqi Kurds and Baghdad.

Tensions eased a week after the cross-border operation when Iraqi President Jalal Talabani, a Kurd, visited Ankara and pledged cooperation against the PKK.

But Turkey's ties with the administration of northern Iraq, led by Massud Barzani, remain chilly and the United States has often called on both sides to mend fences.

The PKK has been fighting for self-rule in Turkey's mainly Kurdish southeast since 1984. The conflict has claimed more than 37,000 lives.