TEHRAN, Aug 29: Iran and Iraq want to bury the past and start a new era of neighbourly relations, visiting Iraqi interim Deputy Prime Minister Barham Salih said here on Sunday.

"The Iraq of (former Iraqi President) Saddam Hussein just wanted to create tensions with Iran, the new Iraq however wants expansion of good neighbourly relations and, especially, peace with Iran," the news agency IRNA quoted him as saying.

"We have decided to settle the disputes of the past and follow a new policy based on common ground between the two states." Salih added after his talks with Iranian Foreign Minister Kamal Kharrazi.

Kharrazi said the two neighbours had agreed not to dwell on the past but to deal with issues which could serve mutual interests in the future. "Iran wants peace, stability and a democratic system in Iraq and considers relations with Baghdad as highly important for the country," Kharrazi said.

The two sides also discussed the fate of an abducted Iranian diplomat. Kharrazi said he hoped Iraqi interim government could help expedite his release. A spokesman of the Iranian foreign ministry said the talks were in preparation for a visit by interim Iraqi Prime Minister Iyad Allawi at a date still to be set.

"I hope that the visit of Prime Minister Allawi will take place at the earliest possible time," IRNA quoted Salih as saying. The two sides did not refer to allegations by Baghdad that Iran has been interfering in Iraqi internal affairs, especially in Shia regions in southern Iraq. -dpa