Prime Minister Tayyip Erdogan said on Thursday that economic sanctions agreed against groups backing Kurdish rebels were not yet in force, denying a report that Turkey had closed its airspace to flights to northern Iraq.

Turkey has massed up to 100,000 troops along its border with Iraq, backed up by tanks, artillery and aircraft, in preparation for a possible large-scale military incursion into northern Iraq, a move Washington says could destabilize the wider region.

On Wednesday, Turkey's cabinet approved unspecified economic sanctions against groups deemed to support the separatist Kurdish PKK in a move widely seen as targeting Masoud Barzani's autonomous Kurdish administration in northern Iraq.

NTV commercial television said earlier on Thursday these included a ban on flights between Turkey and northern Iraq.

I hear from you that the airspace has been closed. There is no such decision, Erdogan told reporters.

Asked if the agreed sanctions were being implemented, he said: Not at the moment.

Ankara accuses Barzani of providing shelter and support to militants of the outlawed Kurdistan Workers Party (PKK) who use mountainous northern Iraq as a base from which to attack security forces in southeast Turkey.

Diplomats say Turkey may hold fire on both sanctions and major military action for now to see whether planned talks in Ankara on Friday with U.S. Secretary of State Condoleezza Rice and further discussions between Erdogan and U.S. President George W. Bush next Monday in Washington yield any results.

NATO-member Turkey knows economic sanctions could end up hurting its own economy as much as that of northern Iraq.

As well as a possible flight ban, Turkish newspapers have mentioned restrictions on traffic through the busy Habur border gate with Iraq, curbs on exports of electricity and cement to northern Iraq and a clampdown on the operations of firms belonging to Barzani in Turkey among the sanctions considered.

On Tuesday, airline officials told Reuters Turkey's civil aviation authority had denied Istanbul-based charter airline Tarhan Tower permission to fly two of its three weekly flights to Arbil, Barzani's capital, this week.

Turkey blames the PKK for the deaths of nearly 40,000 people since the group launched its armed campaign for an ethnic homeland in southeast Turkey in 1984. The United States and European Union, like Turkey, brand the group as terrorist.