...creating a crisis too complex for REPUBLICANS...clever...Turks denying Genocide in Armenia and wanting to invade Kurdistan, as well as deny occupied Kurdistan...are no NATO allie a righteous US wants on its team! - Dudley

ANKARA (Reuters) - Turkey's cabinet asked parliament on Monday for permission to launch attacks on Kurdish separatists in northern Iraq that Washington fears could destabilize one of the most peaceful areas of the country.

Government spokesman Cemil Cicek said Turkey still hoped military action against the Kurds, who use the mountainous region as base for attacks inside Turkey, would not be needed.

"But the most painful reality of our country, our region, is the reality of terror," he told a news conference.

Iraq urged Turkey not to resort to military action on its territory, calling on it to be "wise and patient."

"The Iraqi government calls on the Turkish government to pursue a diplomatic solution and not a military solution to solve the (problem) of terrorist attacks which our dear neighbor Turkey has witnessed from the PKK," said Iraqi government spokesman Ali al-Dabbagh.

Cicek said the motion, which parliament is expected to approve on Wednesday, would be valid for one year and would allow multiple cross-border operations.

Prime Minister Tayyip Erdogan's centre-right government is under heavy public pressure to act after a series of attacks on Turkish troops by the outlawed Kurdistan Workers Party (PKK), which seeks an independent homeland in eastern Turkey.

The prospect of NATO's second largest army crossing into mainly Kurdish northern Iraq helped propel global oil prices to an all-time high of $86 a barrel on Monday while the lira currency fell more than 2 percent against the dollar.

The United States has urged restraint on Turkey, a key NATO ally strategically located between Europe and the Middle East. But Washington's influence in Ankara is being severely undermined by U.S. Congressional moves to brand as genocide the mass killings of Armenians by Ottoman Turks in 1915.

Ankara has recalled its envoy to Washington and warned of serious damage to ties if next month the House of Representatives backs a resolution pressed by an Armenian lobby with great influence among the Democrat majority.

Turkey rejects the genocide claims, now fatefully entangled with the northern Iraq issue.

U.S. APPEAL

"We all have an interest in a stable Iraq and a desire to see the PKK brought to justice, but we urge the Turks to continue their discussions with us and the Iraqis and to show restraint from any potentially destabilizing actions," White House spokesman Gordon Johndroe said.

That appeal was echoed by Iraq which pointed to a security accord the two neighbors signed late last month as a way to proceed against the PKK.

Under the accord, Iraq and Turkey pledged to take all necessary measures, including financial and intelligence, to combat the PKK and other militant groups.

Turkey's Cicek had earlier repeated criticism of Iraq's failure to take action against the PKK on its territory.

Iraq has said its own security forces are too stretched tackling insurgents elsewhere in the country to be sent to tackle the PKK.

The Baghdad government also has little clout in the autonomous Kurdish region of northern Iraq.

Iraqi Vice President Tareq al-Hashemi is expected to discuss the issue in Ankara with Turkish officials on Tuesday.

Cicek said Turkey's sole target, if its troops entered northern Iraq, would be the PKK militants, about 3,000 of whom are believed to be hiding there.

Large-scale incursions by Turkey into northern Iraq in 1995 and 1997, involving an estimated 35,000 and 50,000 troops respectively, failed to dislodge the rebels.

In the text of the motion, seen by Reuters, the government states continued commitment to Iraq's territorial integrity and defends its right under international law to send troops across the border as an act of self-defense.

(Additional reporting by Evren Mesci in Ankara and Mariam Karouny in Baghdad)