The Iraqi government said on Thursday it would not hold talks with the Kurdish autonomous region on reopening its airports and providing dollars for its banks, unless the Kurds commit to "Iraq's unity".
Iraq's central government imposed a ban on direct international flights to the autonomous Kurdish region after the Kurds held a Sept 25 referendum on independence, which Baghdad says was illegal. It is calling for its neighbours to shut the landlocked region's borders.
Among other measures to isolate the Kurdish region, Baghdad stopped selling dollars to four Kurdish-owned banks and called for a halt to its independent crude oil sales.
The Kurds have repeatedly called for negotiations following the referendum in which an overwhelming majority voted for independence.
"To avoid this collective punishment, we invite (Iraqi Prime Minister) Haider al-Abadi, again, ... (to) any form of dialogue and negotiations in conformity with the Iraqi Constitution," the Kurdistan Regional Government (KRG) said in a statement.
It offered discussions "regarding the crossings, internal trade, providing services to the citizens, the banks and the airports."
But Baghdad has said the Kurds must disavow the referendum result as a pre-condition for any talks. Asked about the latest offer, an Iraqi government spokesman said there could be no talks until the Kurds gave a "commitment to Iraq's unity".
The KRG "must accept the sovereign authority of the federal government on (..) oil exports, security and border protection, including land and air entry points," he told Reuters.
The Kurds, who have sought an independent state for generations, say their referendum was meant to be the start of a negotiation that would see them gain independence after agreement with the Iraqi government.
But Baghdad considered the vote illegal, especially as it was held not only in territory that forms part of the Kurdish autonomous region, but also in disputed neighbouring parts of Iraq occupied by Kurdish troops.
Iraq has maintained its tough line towards the Kurds with support of neighbours Turkey and Iran, which strongly oppose the secessionist movement. Washington, long friendly with the Kurds, had also called on them before the referendum to cancel it.
President Tayyip Erdogan's spokesman said on Thursday Turkey would gradually close border crossings with northern Iraq in coordination with the central Iraqi government and Iran.
Turkish Prime Minister Binali Yildirim is expected to visit Baghdad on Sunday to meet with Iraqi Prime Minister Haidar Abadi.
On Wednesday, the Kurdish authorities accused Iraqi forces and Iranian-trained Iraqi paramilitaries of "preparing a major attack" on the oil-rich region of Kirkuk and the area near Mosul. Both are in parts of northern Iraq outside the Kurdish autonomous region but held by Kurdish forces since Islamic State group fighters were driven out.
Baghdad has denied it has plans for a military move against the Kurds.
Abadi said on Thursday he would not use the army against the Kurdish region, and a military spokesman denied any attack on Kurdish forces was planned, saying government troops were preparing to oust Islamic State group militants from an area near the Syrian border.
"We won't use our army against our people or to launch a war against our Kurdish citizens," Abadi said in a statement.
Iraq's Supreme Judicial Council issued arrest warrants on Wednesday for the chairman of the Kurdish referendum commission and two aides for "violating a valid court ruling" banning the independence vote as against the Constitution.
Kirkuk, a Kurdish-held, multi-ethnic city and surrounding province with large oil reserves, has emerged as a flashpoint in the crisis as it is claimed by both Baghdad and the Kurds.
Iraqi forces and Shia Muslim paramilitaries, known as Popular Mobilisation, are deployed south and west of Kirkuk, in areas previously under the control of Islamic State group.
The Iraqi government spokesman said the KRG must acknowledge the authority of the federal government over Kirkuk as another pre-condition for talks.
The area around al-Qaim, where the Euphrates river crosses into Iraq from Syria, is the last part of Iraq still under the control of Islamic State group fighters, who overran a third of the country in 2014.
On Thursday, the Iraqi military dropped leaflets on al-Qaim urging the militants to surrender or face death.
IS group also holds areas on the Syrian side of the border, but is retreating there in the face of two sets of hostile forces - a U.S.-backed, Kurdish-led coalition and Syrian government troops with foreign Shia militias backed by Iran and Russia.
Islamic State group's cross-border "caliphate" effectively collapsed in July when U.S.-backed Iraqi forces captured Mosul, the group's de facto capital in Iraq, after a nine-month battle.