* Project to give a boost to moribund farm sector
* Bioethanol to be used domestically, then exported
BAGHDAD, Sept 13 (Reuters) - Iraq's prime minister has approved a project by a United Arab Emirates-based company to make biofuel from dates that would otherwise be wasted because they have started to perish, Iraqi officials said on Sunday.
Iraq has the world's third largest oil reserves but its crumbling farm sector, which has suffered from decades of sanctions, isolation and war, is the country's leading employer.
A long drought has conspired with entrenched problems like high soil salinity, poor irrigation practices and a lack of proper seeds and fertiliser to hold back domestic farming and make Iraq heavily dependent on grain imports. Iraqi officials are keen to do anything to boost agricultural productivity.
"This project will support Iraq's economy by encouraging farmers to expand date palms farms", a cabinet statement said, announcing Prime Minister Nuri al-Maliki's approval of it.
Iraq, whose date palm plantations dot the banks of the Tigris and Euphrates rivers in an otherwise parched landscape, used to be a leading date exporter. It exports a tiny amount at present, officials say.
Faroun Ahmed Hussein, head of the national date palm board, said the Emirati company would produce bioethanol from dates that farmers cannot export because they are starting to rot. It would be used domestically at first, then possibly later exported.
He declined to name the company, estimate the cost of the project or say how much bioethanol it was expected to produce.
FED TO ANIMALS
He said Iraq produces 350,000 tonnes of dates annually, a sharp fall from 900,000 tonnes produced before the U.S.-led invasion to oust Saddam Hussein but still more than the 150,000 tonnes it currently consumes. Some are fed to animals, he said.
"They can't export the left over quantities owing to their poor quality," Hussein said. "Farmers will be happy to sell their rotten dates instead of throwing them away."
Biofuels are seen by some policymakers as a key element in the fight against climate change, because plants suck up carbon from the atmosphere, and in the quest for alternatives to non-renewable fossil fuels. (Reporting by Ahmed Rasheed; Editing by Tim Cocks)
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