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ANKARA (Reuters) - Turkey called a plan by Iraqi Kurds to hold a referendum on independence a "terrible mistake", saying on Friday that Iraq's territorial integrity and political unity was a fundamental principle for Ankara.

Iraq's autonomous Kurdish region said this week it would hold a referendum on independence, a move that is also unlikely to be welcomed by the central government in Baghdad.

Kurdish separatism is a sensitive issue for Turkey, which has been battling a militant insurgency in its largely Kurdish southeast for three decades.

Ankara is also worried about the advances by a Syrian Kurdish militia in northern Syria, fearing that could embolden the outlawed Kurdistan Workers Party (PKK) in Turkey.

"We think this will represent a terrible mistake," the foreign ministry said in a statement. "The maintenance of Iraq's territorial integrity and political unit is one of the fundamental principles of Turkey's Iraq policy."

The idea of Iraqi Kurdish independence has been historically opposed by Iraq, Turkey, Iran and Syria, as they all fear separatism spreading to their own Kurdish populations.

Iraq's majority Shi'ite Arab community mainly live in the south while the Kurds and the Sunni Arabs inhabit different areas of the north. The centre around Baghdad is mixed.

(Reporting by Tulay Karadeniz; Writing by David Dolan; Editing by Daren Butler and Tom Heneghan)

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