Speaking at a joint press conference with Aznar, President Khatami said Iran and Spain shared common views on many issues and called for development of bilateral relations in political, economic and cultural areas.

The president said Tehran and Madrid are interested in fair peace and stability in the world and believe that relations between countries should be based on mutual respect, adding that the two countries also seek peace in the Middle East based on justice.

He said both Iran and Spain are the victims of terrorism and are determined to eradicate it.

President Khatami said Iran and Spain regard dialogue of civilizations as a basis for relations between nations.

He said dispute among states are normal and the two countries believe that dialogue is the main basis for settlement of the disputes.

For his part, Aznar expressed pleasure with his visit to the Islamic Republic of Iran and said he held 'fruitful' negotiations with President Khatami on objectives pursued by Tehran and Madrid.

He appreciated the initiative of Dialogue Among Civilizations put forward by President Khatami and said talks with the Iranian president on political, economic, cultural and scientific areas would serve to boost bilateral relations.

The Spanish prime minister said the two countries would announce joint undertakings to upgrade economic relations and launch joint campaign against drug trafficking.

Aznar said Spain has extended a 600 million dollar credit guarantee insurance for exports to Iran. Of course the current insurance cover already existed and it has just been extended to support Spanish exports to Iran.

The prime minister hoped that President Khatami would visit Spain soon.

Then President Khatami and Prime Minister Aznar answered the questions raised by reporters.

IRIB reporter asked the president whether he discussed regional issues with the Spanish prime minister, the president said, "In this round of talks we discussed general issues, but we will go to details in the next round of talks tonight. We emphasized that in any peacemaking process the rights of opposing parties should be taken into consideration."

Reporter of Spanish daily, El Mundo asked the president whether Iran would use its influence with Hezbollah of Lebanon to secure the release of three Israeli soldiers and what is Iran's reaction to the oil price rise?

President Khatami said Hezbollah is a Lebanese and Arab popular movement over which Iran has no authority.

"Hezbollah is a movement fighting to liberate the occupied territories from the usurpers and ascribing Hezbollah to any other country is devoid of reality," said the president.

In the Middle East, a lasting peace should be established on the basis of recognizing the right to sovereignty of the Palestinian nation living both in the occupied Palestine or in exile, otherwise peace will not be achieved in the Middle East, President Khatami said.

He said today something is taking place in the Palestinian territory, adding that all should take this as a lesson.

The unarmed Palestinian youth are on one side seeking sovereignty over their lands and the occupation force are on the other side savagely attacking civilians, the president said.

President Khatami referred to the death toll among the Palestinian youth and children in the past three weeks and the considerable number of those wounded in Palestine and said the struggle of the Palestinian nation is the explosion of anger of the people whose rights have been trampled upon for many years.

On the rise of oil price, the president said Iran believes that the interests of both producers and consumers should be respected adding that oil export is in fact export of capital from the producing states and oil plays a vital role in the world economy.

He said the OPEC leaders made decisions in Caracas Summit to help stabilize the market, serving the interests of both producers and consumers.

In response to a question by IRNA about Iran-Spain and Iran-EU relations, Aznar said, "My visit to Iran and President Khatami's visits to European states indicate that there have been progress and I hope it will become even better."

The prime minister said a golden opportunity now at hand should be utilized to cement ties.

He said he would provide a report to the European Union (EU) states about his talks with President Khatami in Tehran in order to explore areas cooperation between Iran and EU members.

Aznar who is on a two-day visit to the Islamic Republic of Iran is expected to be received by Supreme Leader of the Islamic Revolution Ayatollah Seyed Ali Khamenei.

President Khatami and the prime minister will hold second round of talks later Sunday. He is scheduled to hold talks with Majlis Speaker Hojatoleslam Mehdi Karrubi and members of Majlis Commission on Foreign Policy and National Security.

Aznar will also visit Isfahan before heading for home Monday.