By Nick Tattersall and Daren Butler
ISTANBUL (Reuters) - Prime Minister Tayyip Erdogan accused Kurdish politicians on Friday of trying to sabotage talks to end a 28-year-old insurrection, lamenting the absence of Turkish flags during a mass rally to mark a ceasefire by Kurdish rebels.
Jailed rebel leader Abdullah Ocalan called on his fighters to cease fire and withdraw from Turkey in a letter read to hundreds of thousands in the city of Diyarbakir in the mainly Kurdish southeast on Thursday. Kurdish red-yellow-green flags and banners displaying Ocalan's face dominated the crowd.
In line with that call, the militants' top field commander based in northern Iraq, Murat Karayilan, ordered his fighters to halt hostilities against Turkish forces, local media reported on Friday, the most concrete sign yet the rebels were behind their imprisoned leader.
The reports could not be immediately confirmed.
The Kurdistan Workers Party (PKK) led by Ocalan, imprisoned on an island since 1999, had originally demanded an independent Kurdish state. However, it has moderated its declared demands to political autonomy and broad cultural freedom within Turkey.
Erdogan, taking a big political gamble in pushing talks with Ocalan, must avoid stirring fears among conservatives that any deal with the PKK could lead to the breakup of Turkey.
"We are going through an extremely sensitive process vulnerable to provocations," Erdogan told a meeting of his ruling AK Party officials in the capital Ankara.
"The absence of our star and crescent flag in Diyarbakir was a provocation designed to sabotage the process," he said, accusing organizers of the celebrations of "insincerity".
"Today is the day for unity, togetherness and fraternity."
The Kurdish conflict has killed 40,000 people, opened Turkey to accusations of human rights abuses, undermined its ambitions to play a greater role on the world stage and consigned its southeast to poverty. For its part, the PKK is regarded by the United States, European Union and Turkey as a terrorist group.
The mass rally was organized largely by local Kurdish politicians and officials of the pro-Kurdish Peace and Democracy Party (BDP) represented in the national parliament - figures whose co-operation he will need to press the peace process.
BDP co-leader Selahattin Demirtas said Kurds had no problem flying the Turkish flag but were uneasy about it being forced upon them.
"The Turkish flag is the flag of everyone living in this country. However, I think those who are imposing it do not have good intentions. This imposition by racist elements amounts to having to kneel before the flag," Demirtas said.
Ocalan, in talks with government representatives since October, ordered his fighters to withdraw to their bases in the mountains of northern Iraq; but he has set no timetable.
Erdogan told reporters he aimed to complete the process this year. "That is our target. 2014 will then be a healthy election year," he said.
Demirtas said the withdrawal of fighters could be completed by August if a parliamentary committee was set up to monitor it. The Kurdish armed "struggle", he said, "is 99 percent finished". But the spat over the flag indicated that the path towards peace is unlikely to be trouble-free.
Ending Turkey's most intractable conflict would cement Erdogan's reputation as the country's strongest leader since Mustafa Kemal Ataturk, who founded the modern republic from the ruins of the Ottoman Empire, and could land him Kurdish support for his ultimate ambition - taking power as a new executive president in elections next year.
Failure could sully his reputation, plunge the southeast back into a deeper conflict at a time of growing Kurdish assertiveness in northern Iraq and war-torn Syria, and lose him the confidence of the conservative grass roots voters who form the bedrock of support for his ruling AK Party.
PKK "READY FOR WAR AND PEACE"
The biggest obstacle to the process could come from within the PKK itself and hawkish Kurds, who may have been disappointed that Ocalan's announcement simply declared the period of armed struggle over without making any concrete demands.
"The Kurds have been fighting for their rights for 30 years and this state of war has brought them a kind of patience, foresight and wisdom. They know better than anyone about being deceived and left in the lurch," said Ezgi Basaran, columnist with the liberal Radikal daily.
Erdogan has already taken considerable risks since he was elected in 2002, breaking taboos deeply rooted in a conservative establishment, not least in the military, by extending cultural and language rights to the country's 15 million Kurds, who make up roughly a fifth of Turkey's population.
It is a risk none of his predecessors dared take.
In his decade in power, Erdogan has tamed the once all-powerful military, a conservative and staunchly secular force which launched three outright coups between 1960 and 1980 and pressured an Islamist-led government to quit in 1997.
The military saw itself as the guardian of a secular and united Turkey, with little sympathy for Kurdish demands.
Curbing its power removed one of the obstacles to a Kurdish solution and the fact that talks with Ocalan, hated by many Turks and held in virtual isolation on an island prison off Istanbul since his capture in 1999, have been held at all is a testament to Erdogan's political guile.
"(Ocalan) has had to wait for the right conditions, his cadre and for the government to all be aligned," said Ertugrul Kurkcu, a parliamentarian from the pro-Kurdish BDP party.
"He hasn't been sitting still in prison. He has always been preparing himself for this day."
Kurdish expectations include changes to the constitutional definition of citizenship, mother-tongue education from primary school age, the strengthening of local government and a lower threshold for political parties to be represented in parliament.
One of the most contentious could be the question of a general amnesty and freedom for Ocalan, something Erdogan has, for now, ruled out.
(Additional reporting by Ayla Jean Yackley and Seyhmus Cakan in Diyarbakir, Ece Toksabay and Seltem Iyigun in Istanbul and Jonathon Burch in Ankara; Editing by Ralph Boulton and Rosalind Russell)