TEHERAN (REUTERS) - Iraqi Prime Minister Mustafa al-Kadhemi became the first foreign leader on Sunday (Sept 12) to visit and meet with Iran's President Ebrahim Raisi since the hardliner took office in August.

Iraq has been trying to mediate between Teheran and its Gulf Arab foes, including Saudi Arabia, in the hope of stopping its neighbours settling scores on its territory.

Iraq has become the playground of rivalries between Iran on one side and the United States, Israel and Gulf Arab states on the other, with attacks against US forces and assassinations of Iranian and Iraqi paramilitary leaders.

"I hope despite the aims of the enemies of the two countries, we will witness expansion of good relations between Iran and Iraq," Mr Raisi said in a joint news conference in Teheran.

Mr Raisi said Iraq had agreed to waive visas for Iranian pilgrims to Shi'ite holy sites in Iraq later this month on the occasion of Arbaeen marking the end of the 40-day mourning period for Imam Hussein, Prophet Mohammed's grandson.

"Decisions were also made about the two countries' financial issues that should be adopted," Mr Raisi said, without elaborating.

Iraq relies on Iranian gas and electricity, but imports have been irregular recently due to outstanding payments.

Iran's state gas company said late last year that it had slashed supplies to Iraq over more than US$6 billion (S$8.05 billion) in arrears, placing Baghdad and other cities at risk of power shortages.

Iraq's Electricity Ministry said last month that Iranian gas supplied to the central region was reduced from three million to two million cubic metres per day, while to the southern region it was reduced from 17 million to 5 million cubic metres per day.