Madrid, Oct 28, IRNA -- Spanish King Juan Carlos officially welcomed Iranian President Mohammad Khatami at his royal palace, some ten kilometers away from Madrid, on Monday.

The Iranian and Spanish authorities forwent the usual gala evening banquet for a private dinner and reception to head off any protocol gaffes with a view to Khatami's adherence to Islamic law.

The dinner banquet was also attended by Spanish Queen Sofia and Prime Minister Jose Maria Aznar.

National anthems of both Iran and Spain were played and flags of the two states were hoisted in honor of the authorities.

President Khatami's Spain visit is intended to effectively promote the common interests of both countries anchored on mutual respect.

In a pre-departure interview with reporters, at the Tehran International Airport, Khatami said he would review expansion of bilateral cooperation as well as latest regional and international developments with senior Spanish officials.

President Khatami said Spain is one of Iran's most important economic and trade partners, and that during this visit the two countries will focus on ways of further expanding bilateral cooperation, particularly in the economic area.

EU spokesperson : President Khatami's visit to Spain very important for EU-Iran ties

''We consider this trip a very important one. It takes place a few months after the trip of Mr.Solana to Iran and a few months after the visit of President Khatami to Austria,'' Gallach said in an exclusive intrvierw with IRNA in Brussels Tuesday.

Solana and Khatami also met in Vienna.

''Undoubtedly this is a process of deepening the relationship which we consider would be very beneficial for the EU and for Iran as well,'' she said.

Both Solana and Gallach hail from Spain.

''Undoubtedly one part is deepening of the economic ties and the other part is political relations. Both of them we consider very important. It will undoubtedly have an impact as well in the process of strengthening relations between Iran and the EU,'' she said.

Gallach said there are issues which are ''complex and difficult'' and which are also part of the ongoing EU-Iran discussions, such as human rights, cooperation in the fight against terrorism and cooperation in the Middle East.

President Khatami's visit to Madrid is taking place in response to a visit to Tehran by Spanish Prime Minister Jose Maria Aznar in October 2000.

Gallach noted that relations between Spain and Iran are growing.

She pointed out that President Khatami has been welcomed at the highest level by the King and Queen of Spain.

''It is an important signal of growing relationship and I would underline on both parts, the political including all aspects and economic as well,'' stressed Gallach.

Iran, Spain review expansion of economic ties

Mazaheri said the two sides had discussed conclusion of three agreements on investment and customs cooperation as well as tourism.

The agreements, to be signed on Tuesday, will serve as a base to bolster cooperation and investment of the two countries, he added.

A further agreement will be signed on avoiding double taxation, which is complementary to other agreements, Mazaheri said, adding investors of the two countries were not able to operate competitively by paying double taxes.

"The two sides have realized that avoiding double taxation is necessary to the cooperation of their entrepreneurs," the Iranian minister said.

The Spanish side had pointed to some of yet existing problems in the Iranian investment law, which have to be tackled in order to pave the way for Spain's investment in the Islamic Republic, he added.

"Iran and Spain will sign general agreements as well as another agreement on avoiding double taxation in order to prepare necessary ground for the operation of the private sector," Mazaheri said.

He cited oil and gas as a key field for economic cooperation of the two countries.

President Mohammad Khatami arrived in Madrid on Monday on a three-day official visit at the head of a high-ranking politico-economic delegation to discuss bilateral ties as well as regional and international issues, including trade ties with the European Union.

Beside Mazaheri, Iran's Foreign Minister Kamal Kharrazi and several officials of the country are accompanying the Iranian president in the trip, which is taking place at the invitation of Spanish King Juan Carlos.

The trip highlights growing ties between the Islamic Republic and the European Union which is determined to sign a trade accord with Iran.

Spanish press have said that a trade deal to a tune of three billion dollars, mainly between the Iranian oil, gas and petrochemicals sector and Spanish firms, could be in the pipeline.

Khatami on Monday expressed hope that his visit to Spain will effectively promote the common interests of both countries anchored on mutual respect.