A top Russian diplomat was quoted yesterday as saying differences with Iran over the division of the oil-rich Caspian Sea remained, but that more talks would be held to thrash out a solution.

Iranian Deputy Foreign Minister Ali Ahani was in Moscow for discussions this week against a background of flaring tempers in the region over how to divide the Caspian and its oil wealth.

Itar-Tass news agency quoted Russian Deputy Foreign Minister and Caspian envoy, Viktor Kalyuzhny, as saying there were signs all sides were moving closer on how to carve up the sea.

But he added that Iran's demand for an equal 20 per cent split of the sea with the four other littoral states of Russia, Kazakhstan, Azerbaijan and Turkmenistan remained problematic.

"This is different from the position of Moscow, Astana and Baku," Kalyuzhny said of Iran's stance. He said Turkmenistan was also coming round to the idea of splitting the sea in a different way, one that would give Iran less than 20 percent.

Kalyuzhny, who met Ahani on Wednesday, said the Iranian had shown he was aware of the importance of regular dialogue. Kalyuzhny also confirmed a summit between all five Caspian states would take place in the port of Turkmenbashi in Turmenistan sometime in the autumn.

The Russian Foreign Ministry said in a statement Ahani had also met First Deputy Foreign Minister Alexander Avdeyev before the Iranian left for Turkmen capital Ashgabat on Thursday.

"The sides confirmed their firm adherence to the aim of working towards a legal basis for friendship and neighbourliness among the littoral states," the statement said.

Tensions over the sea, whose oil and gas wealth is estimated at billions of dollars, rose two weeks ago when an Iranian warship drove off a vessel used by experts from oil major B.P to explore waters claimed by it and Azerbaijan.

Existing Caspian agreements were drawn up when only Iran and the Soviet Union bordered the sea. Since the fall of communism in eastern Europe, Kazakhstan, Azerbaijan and Turkmenistan have entered the fray, all hoping the Caspian will make them rich.

Iran has insisted the sea should be treated as a lake and split equally five ways.

However Azerbaijan, Russia and Kazakhstan said last week they wanted another method of division, treating the waters as a sea, which would leave Iran with less than 20 percent.

The fifth littoral state, Turkmenistan, has yet to make its position clear, but has criticised Azerbaijan for exploring water it also claims.

Meanwhile, a senior Iranian official said yesterday Tehran backed Turkmenistan in its dispute with Azerbaijan over several blocks in the oil-rich Caspian Sea, and said Baku had no right to invite foreigners to develop them.

"The positions of Iran and Turkmenistan on the Caspian issue are close," Iranian Deputy Foreign Minister Ali Ahani told reporters after meeting Turkmen President Saparmurat Niyazov.

"President Saparmurat Niyazov is also opposed to any unilateral actions by foreign companies on disputed fields in the Caspian," Ahani said through an interpreter.

Baku has voiced protests, accusing Tehran and Ashgabat of uniting forces against its national interests in the Caspian.

Ahani, who visited Moscow earlier this week, said that the littoral states, which also include Russia and Kazakhstan, should discuss the burning issue of Caspian division together, "taking into account the advantages" of each of the variants.

The five Caspian neighbours remain split on how to treat the inland sea - as a lake or a sea. Iran and Turkmenistan would like to see the Caspian divided as a lake into five equal national sectors.

But Russia, Kazakhstan and Azerbaijan have said they prefer to treat the Caspian as a sea. In this case, Iran and Turkmenistan each would get less that the 20 per cent of the sea that they aspire to.

Ahani said Iranian President Mohammad Khatami was expected to pay an official visit to Ashgabat in the autumn, but did not say whether he would also take part in the Caspian Sea summit which Niyazov has proposed to hold in Turkmenistan in October.