by Christian Lowe
BAKU, Aug 5 (AFP) - Iran's President Mohammad Khatami arrived in Azerbaijan Thursday for a long-awaited visit expected to focus on Tehran's unease with the growing US military presence in the oil-rich Caspian Sea state.
Khatami sat down for talks with Azeri President Ilham Aliyev at the start of the first visit of an Iranian leader to the pro-Western neighbouring republic in over a decade.
The official portion of the visit will see the two sides sign 10 documents, according to officials. They include a joint declaration on the Caspian as well as initiatives to boost trade and economic cooperation.
"During the visit the presidents will sign a declaration on friendship and cooperation, and also agreements on tax, civil aviation (and) healthcare," Novruz Mamedov, chief foreign policy advisor to Aliyev, said on the eve of the visit.
But analysts say talks will also focus on a growing military stand-off around the Caspian Sea which has left Azerbaijan in the middle as Washington and Tehran compete for influence in the strategic region.
In recent months, the Pentagon has been ramping up its military assistance to Azerbaijan, a former Soviet republic.
It has run joint exercises with the Azeri navy in the Caspian. Senior US defence officials say they now want to begin a major training programme for Azeri troops and also use military facilities in Azerbaijan as bases for any future deployment of US forces in the region.
Washington says its military presence is designed to help protect Azerbaijan's oil infrastructure.
The United States is backing a major project to export Azeri oil from the Caspian Sea -- home to some of the world's biggest untapped oil and gas reserves -- to international markets.
But Iran is suspicious of US motives, particularly after being branded as part of an "axis of evil" by President George W. Bush.
"For Iran... the participation of the Atlantic powers in the fate of the Caspian region is a very sensitive issue," said Rashad Rzaquliyev, an analyst in Azerbaijan's capital, Baku.
"I think that the presence of American military specialists in Azerbaijan will create something of a tense atmosphere at the talks (between Aliyev and Khatami)."
For its part, Azerbaijan is pressing Iran for a solution to a long-running dispute over maritime borders in the Caspian Sea.
Iran and Azerbaijan, along with the other states with Caspian shorelines -- Kazakhstan, Russia and Turkmenistan -- have been unable to agree on how to divide up the sea -- and the oil reserves beneath its seabed.
The dispute nearly spilled over into armed conflict in 2001 when an Iranian warship fired warning shots at an Azeri research vessel that was prospecting for oil in disputed waters.
Azeri officials have played down the chances of a breakthrough on this issue during Khatami's visit, saying the dispute will be resolved "gradually".
In a mark of the frosty relations between the two countries, the last time an Iranian leader came to Azerbaijan was in 1993, when Khatami's predecessor Ali Akbar Hashemi Rafsanjani paid a visit.
On Friday President Khatami is scheduled to give an address to the Azeri parliament and meet with Iranian businessmen working in Azerbaijan.
The Iranian leader is due to depart the country on Saturday, after a stopover in the northwest Azeri city of Ganja, where he is scheduled to visit the tomb of the revered 12th century Persian poet Nizami Ganjavi.
Though on political issues they often do not see eye-to-eye, Azerbaijan and Iran have much in common.
In both countries the Shia branch of Islam is the majority religion, while some 15 million Iranians, or 20 percent of the population, are ethnic Azeris. Baku and Tehran are also major trading partners.