Iraq and Iran moved to significantly increase their ties this week, with the two governments signing a deal for the Islamic Republic to build a pipeline for direct export of Iraqi crude. The Iraqi Ministry of Oil also invited Iranian companies to bid on the contract for construction of four planned refineries.

The official spokesman for Iraq's Oil Ministry said on Thursday that the Iraqi government has agreed with Iran to start laying oil pipeline for the export of Iraqi oil to the neighboring country.

"The agreement came during the meeting between Iraqi oil minister Hussein al-Shahrestani and Iranian Ambassador to Iraq Hasan Kazemi Qomi at the minister’s office," Essam Jihad told the independent news agency Voices of Iraq (VOI).

"The two agreed to lay the oil pipeline from southern Iraq to Abadan region in Iran in order to export more than 200,000 barrels per day of Iraqi crude oil to Iran according to crude oil international prices," he also said.

He noted that the new pipeline will provide a new way to boost the country's export capacity to Iranian refineries in Abadan.

"They also agreed to arrange a mutual visit for technicians from both countries to prepare the agreement's contracts," the official added.

Iraqi government spokesman Asim Jihad said that Oil Minister Hussain al-Shahristani agreed with the Iranian ambassador on Wednesday to activate an agreement to build a pipeline to carry about 200,000 bpd of Iraqi crude to Iran's southern refineries.

"They have agreed that the technical committees should begin within days mutual visits to discuss costs and the time they need to build the pipeline," Mr Jihad said. "The Iranians will buy the crude based on market price."

Iraq wants to build at least four refineries to help it solve chronic fuel shortages. Its eight pre-existing refineries, none of which were damaged during the invasion, operate at only 50-75% capacity, according to the Oil Ministry.

The ministry said last year that it wants to build a refinery in Nahrain, just south of Baghdad, with a capacity of 140,000 barrels per day. A second refinery at Kuya in the north, is projected at 70,000 bpd. Plans have also been discussed for a refinery in Nassiriya, south of Iraq, for export purposes with a capacity of 300,000 bpd and another in southern Amara.

In other developments in the Tehren's bilateral relations this week, Iran's state-run news service IRNA reports that a meeting on the sidelines of the OIC conference in Islamabad between foreign minister Manouchehr Mottaki and Syrian foreign minister Walid Moualem led to a commitment "to build up contacts to study issues of mutual interest more regularly."