Turkey will press ahead with its controversial Ilisu dam project on the Tigris and has secured credit from three Turkish banks for financing, Environment Minister Veysel Eroglu said on Wednesday.

Western export credit insurers previously said they had quit the project because it did not meet World Bank standards on environment, preservation of cultural heritage and relocation.

Three local banks will extend an additional 300-350 million euros ($430-$500 million) to the government for Ilisu.

'This dam will be built definitely because we need it,' Eroglu told a group of reporters, concerning the 1.2 billion euro project.

The dam is due to provide 3.8 billion kilowatt hours of electricity a year and help wean Turkey off reliance on energy imports.

But it will also swallow up more than 80 villages and hamlets by the time of its planned completion in 2013.

Work on the project was halted in December when the three insurers - Euler Hermes Kreditversicherung of Germany, Austria's Oesterreichische Kontrollbank and Swiss Schweizerische Exportrisikoversicherung - ordered suppliers to stop working on the dam for 180 days.

The insurers were providing credit guarantees for the German, Austrian and Swiss suppliers.

European Union candidate Turkey has said previously it was determined to go ahead with the dam project in its impoverished southeast, a region long scarred by high unemployment and Kurdish separatist violence.

The Tigris and Euphrates rivers both rise in Turkey and flow into Iraq, the latter passing first through Syria.

Turkey began work on the dam in 2006. Environmentalists and historians say almost all of the historic ruins that attract tourists to the southeastern town of Hasankeyf, on the Tigris, would be buried if the project goes forward.

Hasankeyf was used by the Romans as a fortress to ward off the Persians. The town was later destroyed by Mongols and rebuilt in the 11th century by Selcuk Turks. The plans allow for the ruins to be moved to an area nearby.-Reuters