By Daren Butler
DIYARBAKIR, Turkey, March 7 (Reuters) - The face of jailed Kurdish rebel chief Abdullah Ocalan briefly beamed down from billboards in southeast Turkey until police tore down the posters, a mark of official unease over his enduring influence among Kurds as local elections loom.
Ocalan's supporters see the vote as a make-or-break moment for stalled peace talks aimed at ending 30 years of conflict between Ocalan's separatist fighters and the Turkish state.
"There is a feeling that if ... we achieve a stronger (election) result, the peace process will advance," said Gultan Kisanak, mayoral candidate in Diyarbakir for the pro-Kurdish Peace and Democracy Party (BDP) which governs the city.
"But if we relax and our votes decline, we Kurds fear that the peace process could collapse," she said as campaigning got under way in the largest city in the mainly Kurdish southeast.
The BDP has the same grassroots supporters and shares a similar goal of political autonomy for the largely Kurdish southeast region as Ocalan's banned Kurdistan Workers Party (PKK) militant group.
Turkey's top intelligence officials launched peace talks with Ocalan in 2012 that led to a ceasefire a year ago; but Prime Minister Tayyip Erdogan has put the peace process on the backburner in order to deal with a corruption scandal, one of the biggest crises of his 11-year rule.
Against this background, photos of Ocalan emerged this year, taken recently in his island jail of Imrali near Istanbul, in another step in the gradual "legitimisation" of a figure long reviled in Turkey as the "terrorist chief" behind a conflict which has killed more than 40,000 people.
The benign image of a grey-haired and moustachioed Ocalan smiling, arms folded and wearing a grey cardigan was a huge departure from past pictures of the man at large in combate fatigues, holding assault rifle. But was clearly still too much for Turkish state authorities in Diyarbakir.
Ocalan was seized by Turkish special forces in Kenya in 1999 and flown back to Turkey where he was tried and sentenced to hang. The sentence was reduced to life in prison after Ankara abolished capital punishment, but emotions in Turkey over the conflict remain raw.
Courts ordered the immediate removal of the posters and also outlawed a campaign for his release among Kurds, who make up some 20 percent of Turkey's 77 million population and who suffered decades of discrimination.
"The state's mind is still confused," laughed Kisanak, recalling how state officials had taken the photo but then had become uneasy when people started parading it on the streets.
"This is a paradox that must be resolved. Mr Ocalan has a great potential to bring peace, he is a strong leader... The state must create the opportunity for him to serve peace."
The March 30 polls will test how the peace process has affected the standing of the BDP and its main rival, Erdogan's AK Party, which believes absence of bloodshed in the last year and its democratisation reforms will work against the BDP.
"Serious reforms have been implemented, bans on (Kurdish) language and identity lifted. There is a peace process, people are not dying," AKP mayor candidate Galip Ensarioglu told Reuters, arguing that the BDP's past electoral successes had been fuelled by injustice towards Kurds.
"In a normalising Turkey they will no longer be able to use those injustices," he said at his party's campaign centre.
Erdogan showed considerable political courage in pressing reforms, albeit too limited for some Kurds, and taking up talks with the PKK, an act that in the not too distant past could have been denounced as treason. But conflict in the southeast, abutting Iraq, Iran and Syria, has exerted a drag on Turkey's economy.
Diyarbakir has enjoyed an economic revival as growing prosperity across Turkey filters down into the region in the shape of new shopping centres, housing projects and highways.
An improving economy, coupled with hopes of progress towards a peace deal, has been welcomed by many in the region.
"We are happy with Erdogan. He has done a lot for us. He came here and gave the order for the renovation here," said Mikail Isler, 29, pointing to the 11th century Diyarbakir Great Mosque where he sells worry beads.
Opinion polls put the BDP ahead of the AKP in Diyarbakir and much of the southeast despite the positive economic picture. But there is no sign of voters in the region turning away from the AKP because of the graft scandal dogging Erdogan's government.
That scandal has turned into a power struggle between Erdogan, who denies claims of corruption in his inner circle, and U.S.-based Muslim cleric Fethullah Gulen, who counts many followers in Turkey, especially in the police and judiciary.
Erdogan has said the corruption scandal is partly a bid by Gulen to undermine the peace process in the southeast. Gulen's movement denies being against the peace process.
The PKK ceasefire has largely held since Ocalan declared it last March at Newroz, the Kurdish new year. The government has begun implementing reforms aimed at boosting Kurdish rights.
But PKK commanders in the mountains of northern Iraq have warned of renewed violence unless the process moves faster.
Such fears preyed on the minds of locals at a cafe near Diyarbakir's Byzantine city walls, above the Tigris river.
"The PKK will do what Apo (Ocalan) wants, but if there is no progress after the elections, violence could erupt again," said fruit-and-vegetable trader Akif, 43, huddled with friends around a small table overlooking a valley of lush green fields.
The PKK is designated a terrorist organisation by Turkey, the United States and European Union and Erdogan has invested serious political capital in the peace talks in the face of fierce nationalist opposition in Turkey.
Diyarbakir today is more vibrant and relaxed than the tense, impoverished city at the height of the conflict in the 1990s. But tensions have recently resurfaced between the pro-Ocalan camp and Islamist rivals whom they fought back then.
A Kurdish Islamist party, Huda-Par, which counts supporters of the Hizbullah militant group among its members, is hoping to draw support away from the main parties in the local elections by appealing both to voters' Islamic and Kurdish identities.
"People have only voted for the BDP now because there was no alternative. The AKP is the system party, the BDP successfully used the Kurdish identity. But the BDP is not at peace with Islam," said Huda-Par's candidate for Diyarbakir's key Baglar district, Vedat Turgut.
The PKK, which launched its armed insurgency in 1984, has Marxist roots but has tried to win over more religiously conservative Kurds. It remains deeply at odds with Huda-Par.
Huda-Par and BDP supporters have fought street battles in towns across the southeast, blaming each other for violence.
"They (the BDP) have been deliberately pulling us into an atmosphere of conflict. But people are tired of conflict, they are tired of death and blood. They want peace," Turgut said. (Writing by Daren Butler; Editing by Gareth Jones and Ralph Boulton)