By Murad Jambaz
QANDIL MOUNTAINS, Iraq (Reuters) - Rebel Kurdish field commander Murat Karayilan ordered his fighters to begin withdrawing from Turkish soil within two weeks and rebase in the mountains of northern Iraq as part of a peace plan with Ankara to end a three-decades-old conflict.
The pullout, negotiated by Kurdistan Workers Party (PKK) chief Abdullah Ocalan jailed on a prison island near Istanbul, offers the best chance yet of settlement of a war that has killed over 40,000 and battered the Turkish economy.
"The withdrawal is planned to be done gradually in groups and targeted to be completed in the shortest possible time," Karayilan told a news conference in the PKK's mountain stronghold in the Qandil mountains of northern Iraq.
The rebels are expected to move in groups of around half a dozen in a process monitored on the Turkish side by the MIT intelligence agency and across the border by the Kurdish regional government there.
Dressed in baggy olive green fatigues and flanked by other senior PKK rebels, Karayilan said the pullout beginning on May 8 would be halted and his fighters would retaliate if the Turkish army launched any kind of operation against them.
He said the third stage of a three-stage process, following withdrawal and constitutional reform to guarantee Kurdish rights, would be freedom for all PKK members including Ocalan, a step likely to be opposed by Turkish hardliners.
The third stage would be disarmament, something the Turkish government had said should precede the pullout. It was not clear how disarmament would be carried out and under whose supervision.
The Qandil mountains have regularly been targeted by Turkish air strikes but the violence has dwindled since the PKK -designated a terrorist organization by the United States, European Union and Turkey - announced a ceasefire last month.
Turkish Prime Minister Tayyip Erdogan has taken a huge political risk in allowing negotiations with the PKK despite fierce nationalist opposition before elections next year.
Karayilan's announcement bolsters a peace process launched six months ago, when jailed PKK leader Ocalan began talks with Turkish intelligence agents on his island prison near Istanbul.
The struggle has wrought huge human, social and economic damage in NATO member Turkey since the PKK took up arms in 1984 with the aim of carving out a Kurdish state in the southeast. That demand has now been reduced to one of greater autonomy.
The fighting has stunted development of the economy in the mainly Kurdish region, while tens of billions of dollars in military spending has long burdened state coffers.
A peace settlement would also help Turkey's flagging efforts to join the European Union, improve its tarnished human rights record, and enhance its credibility as it seeks to extend influence in the energy-rich Kurdish region of northern Iraq and across the Middle East.
The withdrawal follows a call from Ocalan at the Kurdish new year celebrations of Newroz on March 21 for the PKK to halt hostilities in preparation for their withdrawal to northern Iraq, where several thousand of them are based.
Karayilan disclosed details of what he said was a three-stage process.
He said the second stage after the withdrawal of PKK fighters related mainly to the "obligations of the state and the government", specifically the question of constitutional reform.
"It is vital that a constitution is created which ends the denial of the Kurdish people, accepts the existence and freedom of the Kurdish people and guarantees the rights and freedoms of all identities, beliefs and denominations," he said.
The third stage would involve an amnesty for fighters.
Since coming to power in 2002, Erdogan has extended rights to Kurds who make up 20 percent of Turkey's 76 million-strong population, breaking taboos deeply rooted in the conservative establishment, including allowing Kurdish television broadcasts and elective Kurdish language courses at state schools.
But his administration has also overseen the detention of thousands of Kurdish politicians and activists in recent years, while last summer saw the heaviest fighting in more than a decade with PKK militants.
PKK militants previously withdrew from Turkey in 1999 in response to a call from Ocalan, but hundreds of them were killed in clashes with Turkish security forces in the process.
Erdogan has said he guarantees there will be no repeat of such fighting but has said the rebels should disarm before heading for Iraq to remove the risk of firefights with Turkish forces.
(Additional reporting by Ayla Jean Yackley; Writing by Daren Butler; Editing by Nick Tattersall and Alistair Lyon)