US-led occupation authorities in Iraq have backed plans to build an oil pipeline to Iran to help speed up the flood of oil out of the country.
The pipeline will stretch to the Iranian port of Abadan
The 10km pipeline across the Shatt al-Arab waterway, which Iraq and Iran once fought over, will ease the oil jam building up at the Gulf port of Basra.
"We have agreed in principle to an offer from Iran," Iraq's oil minister Ibrahim Bahr al-Uloum told the FT.
The oil ministry hopes to meet its target of exporting 2m barrels a day.
The cost of the pipeline, which should take three months to build, will be fixed as soon as a feasibility study is completed in the next two weeks, said Mr Bahr al-Uloum.
"I can say with confidence the pipeline will be established by the end of the year," he told the Financial Times.
Meanwhile, coalition officials confirmed that a "memorandum of understanding" had been reached between the former enemies.
This is even though US president George W Bush strained relations between Washington and Tehran after he declared Iran part of an "axis of evil".
"We leave the whole diplomatic question in the hands of the Iraqis. Paul Bremer (the US chief administrator in Iraq) says he realises they (the Iraqis) have to have good relations with all their neighbours," one senior coalition official said.
Iran was one of the first non-coalition states to recognise Iraq's highest body, the US-appointed Governing Council.
Oil production is vital for Iraq's economic stability, but exports and revenues have been held back by narrow access to ports in the Gulf and by guerrilla attacks which have delayed the reopening of its northern pipeline to Turkey.