gained foreign policy points by breaking a logjam in ties with former foe Iraq, analysts said.

The Iranian analysts said last week's swap of prisoners from the 1980-88 Iran-Iraq war, the biggest exchange since 1990, and steps by the two sides towards relaunching pilgrimage visits to holy Shi'ite Moslem sites in Iraq were the biggest achievements in bilateral ties in the past decade.

The exchange coincided with a row between Khatami's cabinet and the conservative-led judiciary over the arrest of Tehran's mayor Gholamhossein Karbaschi, a close ally of the new president.

"I think Khatami's government has been flexible and agreed with Iraq that the two countries should set aside old priorities that had caused the logjam and work on resolvable, humanitarian issues first,'' London-based analyst Alireza Nourizadeh said.

Tehran-based journalist Iraj Jamshidi said: "Despite pressures from opponents, the Khatami government has been actively pushing its foreign policy initiatives.'' "The Foreign Ministry has been much more active than before on ties with Iraq. And the results are there to see: POW swaps, more border trade, and mass pilgrimage trips in sight,'' he said.

In last week's swap, 5,584 Iraqis and some 319 Iranians were released. The two countries exchanged some 70,000 POWs in 1990. The latest exchanges were decided by joint committees Tehran and Baghdad agreed to set up in January after high-level talks.

Iran said on Monday it hoped all remaining POWs would be freed within months.

Tehran earlier said Iranian pilgrims could soon visit holy Shi'ite shrines in Iraq, accepting an offer Baghdad made last year. The issue has been a highly emotional one among Iran's majority Shi'ites. The analysts said a resolution of the POW issue, among the thorniest blocking the normalisation of ties, was an important step forward, but important problems remained which were even harder to resolve.

"For years, Iran's insistence that Iraq stop backing the Mujahideen Khalq and Iraq's demand for the return of its planes had blocked efforts to normalise ties,'' Nourizadeh told Reuters.

Iran and Iraq have long traded accusations of backing each other's armed rebels. Mujahideen Khalq, Iran's main opposition group, is based in Iraq while Tehran has hosted the Supreme Council of the Islamic Revolution in Iraq, a Shi'ite group.

"All factions in Iran agree on the demand that Iraq should stop backing the Mujahideen, so I think Tehran will continue to push this demand,'' Jamshidi said by telephone.

Nourizadeh also said Iran would not give in on the Mujahideen, blamed by Tehran for bombings which killed a president, a prime minister and more than 100 officials.

Iraq has repeatedly demanded the return of 148 Iraqi planes flown to Iran during the 1991 Gulf War over Kuwait. Iran, which says only 22 planes landed safely, insists it would return the aircraft only with the approval of the United Nations.

"I think Iran basically thinks it should keep the planes -- or at least not return any more than 22 -- as part of its war damages claims of more than $100 billion against Iraq,'' he said.

Nourizadeh said Iraq was also concerned over Iran's role in Kurdish-run northern Iraq.

"There is finally movement on Tehran-Baghdad ties, but there is still deep suspicion and many unresolved issues. So I do not think that prospects of their ties are comparable with those of Iran's relations with Saudi Arabia, for example,'' he added.

Coolness between Iran and Saudi Arabia has thawed since the election of Khatami last year on a platform which advocated resolving tensions in Tehran's foreign relations.