Turkish President Tayyip Erdogan has threatened to cut off the pipeline that carries oil from northern Iraq to the outside world, intensifying pressure on the Kurdish autonomous region over its independence referendum.

Key points: Kurdish independence referendum expected to return a "yes" vote

Kurdish independence referendum expected to return a "yes" vote Turkey makes clear option to cut off oil flow is on the table

Turkey makes clear option to cut off oil flow is on the table Also warns of further "punitive measures" involving borders and air space

Mr Erdogan spoke shortly after Prime Minister Binali Yildirim said Ankara could take punitive measures involving borders and air space against the Kurdistan Regional Government (KRG) over the referendum and would not recognise the outcome.

Voting began on Monday despite strong opposition from Iraq's central government and neighbouring Turkey and Iran — both with significant Kurdish populations — as well as Western warnings the move could aggravate Middle East instability.

Mr Erdogan, grappling with a long-standing Kurdish insurgency in Turkey's south-east, which borders northern Iraq, said the "separatist" referendum was unacceptable and added economic, trade and security counter-measures would be taken.

He stopped short of saying Turkey had decided to close off the oil flow.

Hundreds of thousands of barrels of oil a day come through the pipeline in Turkey from northern Iraq, but he made clear the option was on the table.

"After this, let's see through which channels the northern Iraqi regional government will send its oil, or where it will sell it," he said in a speech.

"We have the tap. The moment we close the tap, then it's done."

Mr Yildirim said Ankara would decide on punitive measures against the KRG after talks with Iraq's central Government.

"Our energy, interior and customs ministries are working on [measures]. We are evaluating steps regarding border gates and air space. We will take these steps quickly," he told Turkish broadcasters.

Iraqi soldiers arrived in Turkey on Monday night to join a drill on the Turkish side of the border near the Habur area in the south-east, Turkey's military said in a statement.

Iraq's defence ministry said the two armies started "major manoeuvres" at the border area.

Harbur border crossing blocked

Kurdish women show their ink-stained fingers after voting. ( Reuters: Thaier Al-Sudani )

Local media said Turkey had blocked access to the KRG via the Habur border crossing with Iraq. Ankara's customs minister denied this, saying Habur remained open but with tight controls on traffic, according to the state-run Anadolu agency.

However, Mr Erdogan later said traffic was only being allowed to cross from the Turkish side of the border into Iraq.

Maruf Ari, a 50-year-old truck driver, was one of those who had crossed back into Turkey early on Monday morning. He said a closure of the gate would ruin his livelihood.

"If the border is closed it will harm all of us. I'm doing this job for 20 years. I'm not making a lot of money. Around 1,000 lira ($285) a month. But if the gate is closed, we will go hungry."

The United States and other Western powers also urged authorities in the KRG to cancel the vote, saying it would distract from the fight against Islamic State.

Kurds celebrate after casting their ballots in Kirkuk. ( Reuters: Thaier Al-Sudani )

Shares of Turkish Airlines, which has direct flights to northern Iraq, tumbled 6.5 per cent, underperforming a 1.78 per cent decline in the BIST 100 index. Turkey's currency, the lira, also weakened.

Turkey took the Kurdish television channel Rudaw off its satellite service TurkSat, a Turkish broadcasting official told Reuters.

Turkey has long been northern Iraq's main link to the outside world, but sees the referendum as a grave matter for its own national security.

Turkey has the region's largest Kurdish population and has been fighting a three-decade insurgency in its mainly Kurdish south-east.

'Yes' vote widely expected

Kurds voted in large numbers in the independence referendum, despite warnings that the vote may ignite yet more regional conflict.

The vote, organised by Kurdish authorities, is expected to deliver a comfortable "yes" for independence, although it is not binding.

However, it is designed to give Massoud Barzani, who heads the KRG, a mandate to negotiate the secession of the oil-producing region.

Mr Barzani said that he would step down as president of the KRG in November. ( Reuters: Azad Lashkari, file )

For Iraqi Kurds — 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.

Voters were asked to say yes or no to one question:

"Do you want the Kurdistan Region and Kurdistani areas outside the [Kurdistan] Region to become an independent country?"

Polling stations opened at 8:00am (local time) and closed around 6:00pm, with final results expected within 72 hours.

Turnout among 5.2 million eligible voters was high at 78 per cent, the Kurdish Rudaw TV station said, adding that vote counting was underway.

Voters were joyous to be able to cast their ballots, saying that despite the international pressure to call it off, the vote was a matter of national pride and identity.

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

Meanwhile, a group of smiling women, in colourful Kurdish dress, emerged from the school showing their fingers stained with ink, a sign that they voted.

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 over international borders across the region, Tehran and Ankara fear the spread of separatism to their own Kurdish populations.

Reuters