Simon Jones: Italy's pro-Iranian stance is not universally shared.

His three-day visit, the first by an Iranian leader to a Western country since the fundamentalist revolution in 1979, is being heralded by both sides as opening a new chapter in Iran's relations with Europe.

On Thursday, the moderate Shia Muslim cleric is expected to become the first Iranian president to meet Pope John Paul II.

New era

Speaking at a state banquet held in his honour, President Khatami told a prominent audience: "Iran and Italy...can work together towards...opposing all forms of violence, aggression, terrorism, racial and ethnic discrimination, as well as the proliferation of nuclear arms and weapons of mass destruction."

Jim Muir: Mr Khatami is politically stronger that at any time since he took office

Declaring a new era of détente, he said that peace and freedom required "a dialogue in which each party respects the other and regards the other as an equal".

The visit has attracted criticism from Iranians in exile, who are opposed to the Islamic regime in Tehran, from some Italian politicians and from the US Government.

Opposition protests

Earlier in the day, a crowd of several thousand supporters of the Iranian opposition held a peaceful demonstration near to the presidential palace where President Khatami was being welcomed by his Italian counterpart Oscar Scalfaro.

President Scalfaro (left) gives red carpet treatment to his Iranian counterpart

In Washington, US State Department spokesman James Rubin said Iran still had a long way to go to changing "Iranian policies and practices with respect to support for terrorism and pursuit of weapons of mass destruction.

"We expect and trust that the Italian Government will convey these same concerns to their Iranian guest," he said.

Both Prime Minister Massimo D'Alema and Foreign Minister Lamberto Dini have stressed human rights will be high on the agenda, and they will urge Mr Khatami to adopt non-proliferation policies.

End to isolation

Moderate forces in Iran see the trip as an opportunity for Mr Khatami to boost his international prestige.

Mr Khatami's reformist supporters have just secured an important victory in the Islamic republic's first local elections.

Our Middle East Correspondent Jim Muir says the president clearly believes the time has come for him to begin carrying the message to the Western world that Iran has changed, that it has a new, more tolerant and more outward-looking political culture.

Italy regards Iran as key to Middle East stability and has long tried to serve as a bridge between it and the West.

Last week, the Italian oil company, ENI joined France's Elf Aquitaine in signing a $500m deal with Iran, flouting the United States' long-standing threat of sanctions.

Mr Khatami will also be travelling to France in April.

Since his election two years ago, Mr Khatami has visited the West just once - on a trip to the United Nations in September.