DAHUK, Iraq/CIZRE, Turkey (Reuters) - Turkish warplanes attacked a village in northern Iraq on Wednesday, an Iraqi Kurdish security official said, but Turkey said it wanted to hold back from a major incursion to give diplomacy a chance.

The Iraqi official, speaking on condition of anonymity, said a Kurdish village in mountainous country near Shiranish Islam, 25 km (15 miles) northeast of the northern town of Dahuk, had been heavily bombed at midday. He gave no details of damage.

The Turkish government is under great domestic pressure to strike separatist PKK (Kurdistan Workers Party) guerrillas in northern Iraq who killed 12 Turkish soldiers on Sunday as part of an intensified campaign against government troops.

Washington and Baghdad fear a major Turkish incursion into northern Iraq could destabilize the whole region.

Turkish security sources said earlier that Turkish warplanes had flown a series of sorties 20 km (12 miles) into Iraq in the past three days, while some 300 troops had advanced about 10 km (6 miles) into northern Iraq.

A total of 34 PKK rebels were killed and all the Turkish troops had returned, a Turkish official said.

U.S. Defense Secretary Robert Gates said on Wednesday that Turkey needed better intelligence about the location of Kurdish rebels before launching major strikes into north Iraq, and the State Department said Secretary of State Condoleezza Rice would visit Turkey to try to reduce tension between Turkey and Iraq.

Rice will be in Turkey on November 2 and 3 for meetings with President Abdullah Gul and Prime Minister Tayyip Erdogan, State Department spokesman Sean McCormack said in Washington.

ECONOMIC MEASURES

Turkey’s powerful National Security Council, comprising political leaders and army top brass, met for six hours on Wednesday and said it had recommended that the government take economic measures against groups which aid the PKK.

It gave no details of possible measures, but northern Iraq depends heavily on Turkey for power, water and food supplies.

Turkey, which has NATO’s second biggest army, has deployed up to 100,000 troops, backed by tanks, artillery, fighter jets and helicopter gunships along the mountainous border in case it decides on a large-scale strike.

State-run Anatolian news agency said Turkish warplanes and helicopters had bombed PKK positions in southeast Turkey on Wednesday.

Slideshow ( 10 images )

The troop build-up was aimed at keeping pressure on Baghdad to honor promises to crack down on the estimated 3,000 PKK rebels who use northern Iraq as a base.

A Turkish official quoted Iraqi President Jalal Talabani as saying Iraq might hand over PKK militants to Turkey, but Talabani denied this.

“We have said many times that the PKK leadership does not exist in Kurdish cities but are living with thousands of their fighters in the Qandil mountains, so it is not possible for us to arrest and hand them over to Turkey,” he said in a statement.

Slideshow ( 10 images )

LAST CHANCE FOR DIPLOMACY

The Turkish official said a planned visit to Ankara by an Iraqi delegation on Thursday was a “final chance” for diplomacy. At Turkey’s request, the team will be headed by Iraqi Defense Minister General Abdel Qader Jassim. It will also include Iraqi National Security Minister Shirwan al Waeli.

NATO Secretary-General Jaap de Hoop Scheffer added to the calls on Ankara to stay its hand.

“...I think the Turkish government is showing restraint -- remarkable restraint under present circumstances,” he told reporters at a meeting of the alliance’s defense ministers.

Rice told the House Foreign Affairs Committee on Wednesday she had told Erdogan on Sunday that she took the situation “extremely seriously”.

“Iraq should not be a place where terrorism can hurt Turkey,” she said. “We have a list of things that we believe, if they are undertaken, will help to deal with this situation,” she added, citing Iraq’s pledge to close PKK offices there.

U.S. troops are largely absent from northern Iraq.

Ankara is skeptical about Baghdad’s ability to crack down on the PKK as northern Iraq is a mainly Kurdish region where the central government has little clout. The publication of photographs said to show eight Turkish soldiers captured by the PKK has added to pressure on Ankara to act.

The PKK said the soldiers were in good health but no decision had been made on whether to release them.

Ankara blames the PKK for the deaths of more than 30,000 people since the group launched its armed campaign for an ethnic homeland in southeast Turkey in 1984.