Tehran: Iran is offering a $1 billion loan to Iraq for projects to be handled by Iranian firms, an Iranian official said on Friday, two days before a landmark visit by Iran's president to Baghdad.
Mahmoud Ahmadinejad will make the first trip by an Iranian president since the 1979 Islamic revolution, a visit analysts say will aim to tell the United States that Tehran is an influential player in its neighbour.
Iran and Iraq fought an eight-year war in the 1980s that left about a million dead, but relations - and Iran's influence in Iraq - have increased substantially since the US-led invasion in 2003.
Ahmadinejad was due to start the trip to build on business and political ties with Iraq yesterday.
"Iran's $1 billion loan to Iraq has been one of the main issues of discussion with the Iraqi side," Iranian Deputy Foreign Minister Ali Reza Shaikh-Attar said in Baghdad.
The loan will cover basic projects to be executed by Iranian contractors using Iranian goods and equipment, he said in the report carried on the state broadcaster's website.
The United States has accused Iran of funding, training and equipping Iraqi militias in a bid to destabilise Iraq, a charge Tehran denies, blaming the US troop presence for instability. Iran says it wants a stable neighbour and US troops out.
Iran and the United States, which have not had diplomatic relations for almost three decades, have held three rounds of rare face-to-face talks in a bid to quell the violence. Iran put off a fourth round because of unspecified technical issues.
Shaikh-Attar said three other agreements were being discussed, covering avoidance of double taxation, support for joint investment and customs cooperation.
"Representatives of the two countries are also discussing agreement on the Abadan-Basra oil pipeline," he said, referring to Abadan in southwest Iran and Basra in southern Iraq, cities which are both near the shared border.
In September, an Iraqi official cited a plan to build a pipeline from Basra to Abadan refinery that would initially export 100,000 barrels of oil per day. Both states are members of the Organisation of Petroleum Exporting Countries.
Shaikh-Attar said five to 10 agreements would be signed by Ahmadinejad during his trip.
An Iranian Industry and Mines Ministry official, Mohsen Shaterzadeh, said discussions with Iraq would include plans for joint companies in cement, car manufacturing, food, textiles, petrochemicals and agriculture.
Banks from the two states would discuss setting up a joint venture bank, Shaterzadeh said, identifying the institutions involved as Iraq's Rafidain Bank, Export Development Bank of Iran and Iran's Bank Tejarat.
Several Iranian banks have been targeted by US and UN sanctions imposed over Iran's disputed nuclear programme, but not the Iranian banks cited in the website report. Iran and the United States are locked in a row over Tehran's nuclear plans.
Advice: 'Build on real progress'
Iraq should build on a recent string of economic and budgetary successes by strengthening its oil and banking industries, the US Treasury's top international adviser said.
"The Iraqis have made real progress on the economic agenda over the last year or so," David McCormick, Treasury undersecretary for international affairs, told reporters in Washington after returning from a two-day trip to Baghdad. "With that said, there's a lot of work to do."
McCormick praised Iraq's government for bringing inflation to 1.3 per cent in January from 65 per cent at the end of 2006 and passing a $48 billion budget last month.
The country has also improved its infrastructure so officials can spend its oil revenues and make capital investment, something that US and international officials have said is lacking.
"The Iraqis have made some progress on budget execution," he said. ""Spending looks like it's clearly increased significantly over the 2006 spending."