China has said the "legitimate interests" of foreign countries in Iraq should be safeguarded, in a likely reference to contracts Chinese companies signed with the Saddam Hussein regime.

State Councilor Tang Jiaxuan made the remark in Beijing while meeting with Jalal Talabani, a leader of the Iraqi Kurds and a member of the interim Governing Council, the China Daily said today.

"The legitimate interests of various countries in Iraq should be guaranteed," Tang, a former foreign minister, was quoted as saying.

Tang also told his visitor China was ready to assume a "positive role" in the economic reconstruction of post-war Iraq.

Chinese companies were engaged in extensive business with the former Iraqi regime, but these deals now face an uncertain future following the change of guard in Baghdad.

The China National Petroleum Corporation in June 1997 signed a contract with Baghdad allowing the Chinese oil giant to develop the Al-Ahdab oil field in southern Iraq, for instance.

But in May this year, Iraq's oil minister was quoted as saying that the contract had been frozen.

The China Aviation Technology Import-Export Corporation (Catic) meanwhile won a contract to sell meteorological satellite and surface observation equipment to Saddam's Iraq, according to the Heritage Foundation, a conservative US think tank.

Catic also received United Nations approval in July 2000 to sell fiber optic cables to Iraq worth $2-million, the Heritage Foundation said.

Talabani has previously remarked about the fate of contracts signed between foreign companies and the Saddam administration.

In May, he told French radio that all agreements signed by France with Iraq's ousted regime would be up for reconsideration, in a likely hint at lucrative oil deals signed in the 1990s with French oil companies.

Talabani's visit comes after ties between the two countries were thrown into months of limbo because of the former, Saddam-appointed ambassador's refusal to leave Beijing, despite being recalled by the Governing Council.

Ambassador Muwaffaq al-Ani's departure was not announced until this week.

Talabani, whose visit presumably was made possible after the ambassador left, heads the first Iraqi delegation to visit China after the Iraq war.

During their talks, Tang said China supports a settlement of the Iraq issue that relies on the Iraqi people.

"A new Iraqi regime should be established as soon as possible and should be universally representative," Tang said, according to the Xinhua news agency.

"The political will and choice of the Iraqi people should be fully respected".

China, one of the UN Security Council's five permanent members, also believes effective UN participation would be conducive to the proper settlement of the Iraq issue, Tang said. – Sapa-AFP.