Arab ministers gathered in Cairo on Saturday to draw up sanctions against Syria to punish President Bashar al-Assad's regime for defying an ultimatum to allow in observers and pressing a deadly crackdown.
The finance ministers were to thrash out a package -- expected to include the suspension of flights and freezing of government assets -- which will be put to foreign ministers on Sunday.
Turkish Foreign Minister Ahmet Davutoglu said he would join Sunday's meeting to harmonise his government's measures with those of the Arab League, saying that Ankara's former ally had missed its "last chance" by failing to heed the Arab ultimatum.
But Iraqi Foreign Minister Hoshyar Zebari, whose country has close economic ties with Syria and a large refugee community in its western neighbour, said it was "not possible" to impose sanctions on Assad's regime.
The Arab League had set a Friday deadline for Damascus to agree to the details of the observers' mission, part of a reform deal Syria had previously said it accepted.
Davutoglu, whose government has expressed outrage at the mounting bloodshed in its southern neighbour that saw at least 16 people killed on Friday, said Syria's refusal to allow in observers could only mean it had something to hide.
"Syria was expected to say yes to the observers... unless there is a reality it hides about the situation in Syrian cities," Davutoglu said after the deadline expired.
"As it said no, it increased... the concerns on the humanitarian situation," he said, in the wake of UN estimates that the crackdown has cost more than 3,500 lives since March.
Ankara already has some measures in hand against Damascus, including a suspension of joint oil exploration and a threat to halt power exports.
"We are going to harmonise them with those prepared by the Arab League," Turkey's Anatolia news agency quoted Davutoglu as saying.
But Iraq, which abstained when the Arab League voted earlier this month to suspend Syria and threaten sanctions, expressed its strong reservations about the proposed package.
"It is not possible, in the opinion of Iraq, to impose economic sanctions on Syria," Zebari told reporters in the Iraqi shrine city of Najaf.
"We announce our reservation on this issue," he said, although it was not immediately clear if he meant Baghdad would refuse to enforce any economic sanctions agreed by the Arab League.
President Jalal Talabani said Iraq was afraid extremists might take over in Syria if Assad's regime falls, according to a Saturday statement on the presidential website.
"We are worried about the alternative... we are afraid of the extremist party, if it replaces the old," Talabani said in an interview with Iraqiya television, the statement said.
"We are afraid that if extremist forces come to power, they would be hostile to democracy, and hostile to Iraq."
Syria depends on its Arab neighbours for half of its exports and a quarter of its imports.
Were the 22-nation bloc to impose serious economic sanctions, the impact would be crippling for a country already a facing a raft of punitive measures from the European Union and the United States.
"If that is to happen, it will be very unfortunate because the damage will be to all sides," Syrian Economy Minister Mohammed Nidal al-Shaar told AFP in an exclusive interview.
But "we don't expect all Arab countries to yield or participate in sanctions," he added. "In fact, we are almost certain that some Arab countries will not participate."
Lebanon, which has a government dominated by Damascus ally Hezbollah, has already made clear it will not enforce any economic sanctions against its larger neighbour.
In this month's Arab League vote, Lebanon joined Yemen and Syria itself in voting against the threat of sanctions.
The pan-Arab bloc now says that it wants UN help in its showdown with Assad after previously shying away from internationalising the crisis.
UN Secretary General Ban Ki-moon is "extremely concerned at the escalating crisis and mounting death toll in Syria" and is ready to help the Arab League, UN spokesman Martin Nesirky said.
Last month, European governments put a draft resolution to the UN Security Council that would have threatened "targeted measures" against Damascus, but it was vetoed by Beijing and Moscow.
Syrian ally Russia made clear it remains opposed to sanctions.
"At this stage, what we need is not resolutions, sanctions or pressure, but inter-Syrian dialogue," foreign ministry spokesman Alexander Lukashevich said.