REPORT: Turkey's Erdogan threatens to cut off oil from Iraq's Kurdish area over referendum

President Tayyip Erdogan warned on Monday that Turkey could 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.

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 recognize the outcome.

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

Erdogan, grappling with a long-standing Kurdish insurgency in Turkey's southeast, which borders on northern Iraq, said the "separatist" referendum was unacceptable and 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."

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," Yildirim 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 southeast, Turkey's military said in a statement. Iraq's defense ministry said the two armies started "major man-oeuvres" at the border area.