Iran's new envoy to Baghdad said on Tuesday that the latest round of sanctions imposed on his country would not affect growing trade with Iraq which is now worth billions of dollars.

Hassan Danaie-Far's remarks to reporters came during his first news conference since arriving in the Iraqi capital to replace former ambassador Hassan Kadhami-Qomi.

"The sanctions will not affect economic relations between the two countries," Danaie-Far said at the Iranian embassy in central Baghdad.

"Economic relations (between Iraq and Iran) are on a natural path, despite having stopped for several decades," Danaie-Far said. "They are improving now, day by day."

The UN Security Council hit Iran with a fourth set of sanctions on June 9 over its nuclear programme. The United States and European Union have since imposed even tougher punitive measures of their own which contain provisions to penalise Tehran's trading partners.

The Iranian ambassador said bilateral trade with Iraq currently amounted to about seven billion dollars a year, adding: "This figure will increase in the near future."

However he side-stepped questions about the alleged smuggling of crude oil derivatives to Iranian territory from northern Iraq which has alarmed US officials in Baghdad.

"We consider it as an Iraqi domestic issue," said Danaie-Far.

"We have nothing to do with it. There are lots of goods that come and go to and from our borders to other countries, we do not intervene in this issue. The Iraqi officials must stop the cargo," if smuggling is expected, he added.

Under now-executed dictator Saddam Hussein's regime, Tehran and Baghdad fought a devastating war from 1980 to 1988 in which about one million people were killed.

Relations between the two neighbours have warmed considerably since Saddam was overthrown in 2003 when US-led forces invaded the country, although many of Iraq's Sunni Arabs continue to eye Iran with suspicion.

Danaie-Far, however, denied that Tehran was meddling to the detriment of Iraqi politics, more than five months after an inconclusive parliamentary election that has left the war-wracked country without a new government.

"We support an Iraqi government elected by the Iraqi people that respects the constitution and all the parties," he said.

"We are making efforts to support the political process and the stability in this country, and we do not intervene in its internal issues."

earlier related report
Iran's Khamenei aide denies comments on US talks
Tehran (AFP) Aug 10, 2010 - An advisor to Iran's supreme leader Ayatollah Ali Khamenei denied on Tuesday expressing Tehran's readiness for nuclear talks with the United States, the official news agency IRNA reported.

"This report that 'we are ready for talks with America about the nuclear programme' is denied," the office of Ali Akbar Velayati said in a statement.

Velayati had told reporters at a news conference in the Iranian embassy in Damascus on Monday: "While we do not have any faith in the American government... Iran is ready for talks on its nuclear programme."

The veteran diplomat and top Khamenei advisor said in his Tuesday statement that the comments made at the conference had been: "Iran has never ruled out negotiations and this is not just about America but... talks can take place with other countries such as the members of P5+1 and the Vienna group with respect to Iran's reservations."

The United States has led international efforts to curb Iran's nuclear drive and it has had no diplomatic ties with Iran for over three decades.

The so-called P5+1 includes UN Security Council permanent members -- Britain, China, France, Russia and the United States -- plus Germany.

The Vienna group which is made up of the United States, France and Russia is involved in a nuclear fuel exchange proposal with Iran.

Last week Iranian President Mahmoud Ahmadinejad said he was ready for face-to-face talks with his US counterpart Barack Obama on "global issues."

On Sunday US Secretary of State Hillary Clinton said Washington remains "open to engagement" with Iran while adding that Tehran had "to reassure the international community by words and actions as to what their nuclear program is intended for."

Washington and other world powers suspect that Iran is masking a weapons drive under the guise of a civilian atomic programme. Tehran insists its nuclear programme has no military aims.