ANKARA -- Iraq and Turkey, a key U.S. ally, have agreed to work for a long-term economic cooperation pact similar to a deal discussed between Baghdad and Moscow, visiting Iraqi Trade Minister Mohammed Mehdi Saleh said Friday.

The move is likely to displease Washington, which values NATO member Turkey as an important Muslim ally whose support would be crucial in a possible U.S. attempt to oust the regime in Baghdad.

Ankara is strongly opposed to any such operation.

Speaking after a meeting with Prime Minister Bulent Ecevit, the Iraqi minister told AFP that Baghdad had proposed to Ankara an accord involving comprehensive joint investment projects.

"This proposal was accepted in principle. The two sides will begin work over the details later," Saleh said in comments through an interpreter.

He then elaborated in English: "The principle is to develop a program by which we conclude ... a long-term agreement to promote the economic and trade relationship between Iraq and Turkey.

"This agreement shall include all aspects of economic cooperation in the field of oil, extraction of oil, gas, refineries," Saleh said.

Cooperation in the sectors of health, agriculture, infrastructure development, electricity, transport and communication was also envisaged, he added.

There was no immediate comment on the issue by the Turkish side.

Much to the discontent of Washington, Russia this week confirmed it was close to sealing an economic cooperation pact with Iraq, which has been valued by some at up to $40 billion. Asked about the value of the planned deal with Turkey compared to the one with Russia, Saleh said: "Maybe it's more or less, we will conclude (this) according to the projects."

Turkey has in recent years revitalized trade with Iraq in a bid to compensate for economic losses -- estimated at some $40 billion -- inflicted by UN sanctions imposed on Baghdad for its 1990 invasion of Kuwait.

Turkish officials, who met with Saleh earlier, hailed the improvement in bilateral trade.

"Our trade volume, which had all but stopped in 1990, has reached a point of surpassing one billion dollars," State Minister Edip Safter Gaydali said, according to Anatolia news agency. Foreign Trade Minister Tunca Toskay underlined that "a very serious relationship based on (mutual) trust has been developed with Iraq in the past three years."

Turkey has become one of the main exporters to Iraq and Turkish companies have undertaken projects worth $1.2 billion there, Toskay said.

But he added: "We are concerned over a war breaking out there ... it is obvious we will suffer."

Saleh said that during their meeting Ecevit reiterated Turkey's support for Iraq's territorial integrity and the need to resolve tensions between Baghdad and Washington peacefully.

Stuck in a deep economic recession, Turkey also worries over the financial fallout of a war at its doorstep and constantly reminds Washington of the massive losses it has suffered due to the sanctions imposed on Iraq after the Persian Gulf war, when Turkey backed the United States.

Saleh was to travel on to Istanbul to meet with Turkish businessmen and then to Izmir to visit an international trade fair.