Turkey is pursuing a delicate but dangerous strategy after allowing peshmerga fighters to transit its soil to the besieged Syrian town of Kobane, fearing Kurdish domination of northern Syria but also risking the collapse of the peace process with Turkish Kurds.

While the United States and the West see the Islamic State jihadists battling Kurds for Kobane as enemy number one, Turkey is equally worried about the risks to its security from separatist Kurdish groups.

President Recep Tayyip Erdogan has insisted that the fighters of the Democratic Union Party (PYD) leading the battle against IS for Kobane are part of a "terror group" allied to the Kurdistan Workers Party (PKK) who have fought Turkish security forces in a three decade insurgency for Kurdish self-rule.

Yet battling Western criticism Turkey was too soft on IS, Erdogan last week allowed a modestly-sized contingent of around 150 Iraqi Kurdish peshmerga fighters to cross its territory to join the battle for Kobane.

The move was Turkey's only concession in a tricky balancing act aimed at preventing the de-facto independence of Kurdish-populated Syrian territory while also placating the West and Turkish Kurds.

"The Turkish government keeps treating the PKK/PYD as its worst enemy -- worse than IS it seems," said David Romano, Associate Professor at Missouri State University and author of several works on the Kurdish movement.

- 'Peshmerga good, PKK bad' -

Prime Minister Ahmet Davutoglu made clear in an interview with the BBC broadcast last week that Ankara sees three "terror" groups at work in Syria -- IS, the PKK, and the regime of President Bashar al-Assad.

Erdogan inflamed sentiment among Kurds on October 7 when he baldly stated that Kobane was falling, seemingly accepting the capture of the town as a fait accompli.

The peshmerga were given a hero's welcome by Turkey's Kurds who lined the streets to greet their arrival, in scenes that received zero coverage on pro-government television and were regarded with horror by some in Ankara.

But Turkish Defence Minister Ismet Yilmaz said there are no plans for a second deployment of peshmerga and there are also no signs of Turkey offering more.

Rather than a sign Erdogan was bending towards the PYD, the peshmerga deployment was rather new evidence of Ankara's flourishing ties with Iraqi Kurdistan.

"The Iraqi Kurds with their cautious foreign policy and pro-capitalist, conservative politics gave the government in Turkey an opportunity to show that it was just anti-PKK, not anti-Kurdish," said Romano.

But the dilemma for Turkey is that the Kobane crisis arose at a critical time in its own peace process to end the conflict with the PKK, which has left 40,000 dead since the group began its armed struggle in 1984.

Over 30 people were killed last month when Kurdish anger over Erdogan's softly-softly strategy against IS spilled onto the streets. The PKK has warned that a fragile ceasefire that has largely held since 2013 will be over if Kobane falls to IS.

- 'Setback for peace process' -

The International Crisis Group (ICG) said in a report published Thursday that the peace process was at a turning point where it would either collapse "as the sides squander years of work" or accelerate.

"As spillover from Middle East conflicts open up dangerous old ethnic, sectarian and political faultlines in Turkey, the government and the PKK must seek a common end goal that goes beyond a mere maintenance of a peace process," it said.

According to a new report by the the International Institute for Strategic Studies (IISS) the Kobane crisis is "a major setback to hopes of an imminent resolution of the broader Kurdish question in Turkey."

The situation is made even more combustible by the potential for internecine clashes within Turkey's Kurdish community involving the radical Kurdish Sunni Muslim Huda-Par group which is sympathetic to IS and abhors the PKK.

But Davutoglu said the government would pursue the peace process with "absolute determination", describing it as a "success story" that was essential for Turkey's future survival.

The ruling Justice and Development Party (AKP) is acutely aware of the importance of the votes of Turkey's estimated 15-20 million Kurds as it prepares for legislative elections in June.

"We have been at war with Turkey for years. Neither we nor Turkey reached our goal through war. So there must be a political solution," the chief of the PKK's armed guerrillas Cemil Bayik told Austria's Der Standard newspaper in an interview.