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Thu 9 Aug 2007 04:09 PM

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Iraq, Iran to build oil pipeline

Old enemies to work together on pipeline that will carry 200,000 barrels of Iraqi oil to Iran per day.

Iran and Iraq will sign a deal in the next few days to build a pipeline that would transfer crude from southern Iraqi oilfields to refineries in Iran, a senior Iranian official was quoted as saying on Thursday.

Iraq announced in May it had agreed to begin discussions with Iran over the pipeline that will carry 200,000 barrels of Iraqi crude to Iran per day.

"Based on this contract the Iraqi crude will be imported and oil products will be exported (to Iraq)," Iran's official IRNA news agency quoted First Vice-President Parviz Davoudi as saying.

He said Iraqi Oil Minister Hussain al-Shahristani would visit Tehran "in coming days". Davoudi was speaking after talks with Iraqi Prime Minister Nuri al-Maliki who visited Tehran on Wednesday and Thursday.

Iraq, which has faced chronic fuel shortages, is now looking to build four refineries and has asked Iranian firms to bid for such contracts across the country.

Decades of wars, sanctions and underinvestment have slowed a recovery in Iraq's oil output.

Shahristani said in May Tehran was keen to construct the whole pipeline but his country would also consider other offers. Iraq needs to attract investment from foreign firms to develop fields and boost output.

The value of the contract is yet to be announced.

Iran and Iraq, which fought a bitter war in the 1980s, have been strengthening ties since the US-led invasion in 2003, arousing concern among Iraq's once dominant Sunni minority and other Arab states as well as in the US.

Iran's Foreign Minister Manouchehr Mottaki said on Thursday the two countries should expand oil and gas cooperation.

But analysts have said Iran is unlikely to be able to meet Iraq's refining needs, as it lacks the technology and is also short of gasoline supplies.

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