By Mohammed Abbas
BAGHDAD (Reuters) - Iranian troops have withdrawn partially from a disputed oil area claimed by both Tehran and Baghdad, Iraqi and Iranian officials said on Sunday, possibly defusing a border feud straining the two nations' delicate ties.
Iraqi government spokesman Ali al-Dabbagh said a group of Iranian troops who had taken over an oil well in a remote region along the Iran-Iraq border last week were no longer in control of the well, which Iraq considers part of its Fakka oilfield.
"The Iranian flag has been lowered. The Iranian troops have pulled back 50 metres, but they have not gone back to where they were before. The Iraqi government asked for the troops to go back to where they were," Dabbagh said.
A border official in Iran said Iranian forces had returned to their original position after dismantling a barricade built by Iraqi soldiers near the disputed oil well.
"Iraqi forces had erected the now disassembled barricade next to the No. 4 oil well in Fakka," the official told Iran's state Press TV on condition of anonymity.
The border flare-up kicked off a storm of emergency meetings and bilateral phone calls, with Baghdad calling for an immediate withdrawal of foreign troops while it sought to contain damage to its charged relationship with neighbouring Iran.
Global oil prices climbed on Friday following initial media reports that Iranian troops had commandeered an Iraqi oil well.
The news was all the more worrisome as Iraq prepared to sign giant contracts with leading global oil firms, a milestone in its efforts to turn around its oil sector and secure foreign cash despite ongoing violence and other obstacles to investment.
Analysts PFC Energy said the incident could have a lasting impact on dealings with foreign firms, especially those related to fields located on or near Iraq's border with Iran.
"Whether by coincidence or design, Tehran's incursion will raise the risks associated with these investments and ... border dispute resolution are likely to be a feature of the (firms') future negotiations," it said in an analysis note from December 18.
Conflict with fellow Shi'ite Muslim majority Iran, a sometime rival that shares deep historic and religious ties with Iraq, is an especially sensitive issue for Iraqi officials several months before parliamentary elections on March 7.
As the Iraqi government moves firmly out of the post-war U.S. shadow, even Iraqi officials friendly with Tehran cannot afford to be seen as bowing to any foreign powers, especially Iran.
Some members of Iraq's Sunni Arab minority criticised the government of Shi'ite Prime Minister Nuri al-Maliki for a feeble response to the standoff.
"It is time to tell the Iranian regime to stop intervening in Iraq," said Saleh al-Mutlaq, a leading Sunni politician.
DUSTY OUTPOSTS
Iran's Foreign Minister Manouchehr Mottaki and Iraqi counterpart Hoshiyar Zebari underlined in a Saturday phone call the need for a meeting "with the intention of enforcing bilateral border agreements," Iran's state broadcaster IRIB said.
Dabbagh said a joint committee would begin to look at demarcating the border in the desert area southeast of Baghdad.
Even after his announcement, there was confusion in Iraq about the status of Iranian troops, reflecting the difficulty of defining clear borders in such remote, uninhabited area.
Border outposts dot the Iraqi side of the border, where Iranian facilities can be seen in the distance across bare expanses of sand and dirt.
Iran and Iraq have a long history of border feuds, including one that escalated into a bloody eight-year war in the 1980s. The relationship warmed after Saddam Hussein's ousting in 2003, when fellow Shi'ite Muslims took over in Baghdad and the countries' trade and religious tourism picked up.
According to Iraqis, the field is one of seven that comprise Fakka, a relatively small field that now produces about 10,000 barrels of oil per day.
But Iraqi officials say the well in question has only been operative briefly -- right before the Iran-Iraq war in the late 1970s -- and has been still since.
Iran says the well falls within Iranian borders.
Iraq's Oil Ministry offered global companies a development contract for Fakka and nearby fields in an energy auction in June. But a Chinese consortium declined the ministry's proposed fee for running the fields.
The government is hoping that a host of new deals, some of which are due to be initialled this week, will transform the outdated oil industry and bring production capacity to an impressive 12 million bpd in six or seven years. That would put Iraq just behind Saudi Arabia, the world's top oil producer.
(Additional reporting by Aref Mohammed in Basra and Muhanad Mohammed, Aseel Kami and Suadad al-Salhy in Baghdad; writing by Missy Ryan; Editing by Alison Williams)
