BAGHDAD Tehran and Baghdad pledged on Saturday to pursue a diplomatic solution to a border dispute over accusations that Iranian troops seized an oil well inside Iraq.
The Iranian flag was flying over the disputed oil well in a remote desert area southeast of Baghdad early on Saturday and an Iranian military tent was pitched nearby.
"We call for calm and for a peaceful solution to this matter, far from any military escalation," Iraqi government spokesman Ali al-Dabbagh told Reuters Television in Baghdad.
Iran, which has oil wells nearby, maintains it owns the well in question. Iran's Arabic-language al Alam state television channel quoted a military statement as saying: "Iran's army denied that Iranian troops seized an oil well inside Iraq."
Oil prices rose on Friday on reports about the commandeered well at Fakka oilfield in Maysan province, where border disputes test the two countries' ties more than 20 years after they ended an eight-year war in which an estimated 1 million people died.
Iraq has demanded an immediate withdrawal of about a dozen Iranian troops it says captured the well, but has tempered its demands with assurances that it is not looking for a fight.
The Iraqi government, which held an emergency security meeting on Friday, summoned Iran's ambassador in Baghdad, Hassan Kazemi-Qomi, to discuss the matter.
An embassy spokesman said the envoy told the Iraqis a joint committee that includes oil and military officials from both countries was responsible for settling such problems.
"We will resolve this issue in a diplomatic fashion," the spokesman said on condition of anonymity.
Baghdad's careful words may reflect the Iraqi government's desire to avoid lasting damage to its delicate relationship with Iran, a fellow Shi'ite Muslim majority country and regional power opposed to the U.S. military presence in Iraq.
It may also indicate Iraq's desire to avoid adding to the perception of investment risk in Iraq, where violence continues six years after the U.S.-led invasion and the government is working to secure energy deals with foreign firms.
Dabbagh said the affair would not interrupt output or exports from Iraq, which has the world's third largest oil reserves and exported an average of 1.9 million barrels per day last month.
Developing fields such as Fakka is part of Iraq's plan to more than quadruple output capacity to 12 million barrels per day in six or seven years and become a leading energy producer.
The Oil Ministry offered a contract to develop Fakka, which produces about 10,000 barrels per day, and nearby fields in an auction in June. Foreign companies declined Baghdad's terms.
Former Iraqi Oil Minister Ibrahim Bahr al-Uloum said the disputed well, one of seven at Fakka, was about 300 meters inside the Iraqi border and was drilled by Iraq. He said it had been disputed for decades and had only briefly produced oil.
Oil officials in Iraq say Iranian soldiers have temporarily occupied the well several times in the past year, calling such actions a provocation.
Iranian troops were still camped at the oil well on Saturday, Dabbagh said. An official in Maysan, who asked not to be identified, said the local government would send a delegation to the remote area on Sunday.
The response to the feud from the United States, at odds with Tehran over its nuclear program, has been notably muted and U.S. officials in Iraq have made no direct comment.
However, Admiral Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, said during a visit to Baghdad on Saturday that Iran's influence continued to be mainly negative for Iraq.
"I worry a great deal about Iran's view of destabilizing this region," he said.
Iranian Foreign Ministry spokesman Ramin Mehmanparast told the official IRNA news agency the matter reflected "a psychological and media war launched against Iran, aimed at harming the brotherly relationship between Iran and Iraq."
(Additional reporting by Suadad al-Salhy and Mohammed Abbas in Baghdad and Parisa Hafezi in Tehran; writing by Missy Ryan; editing by Andrew Dobbie)