Moves come as Saudi Arabia competes with rival Iran for influence over Iraq.

Saudi Arabia has reopened a consulate in Baghdad for the first time in nearly 30 years and announced a one billion dollars aid package for Iraq.

The diplomatic mission in Iraqi capital’s heavily fortified Green Zone was inaugurated on Thursday at a ceremony, during which Iraq‘s Foreign Minister Mohamed Alhakim raised a green Saudi flag over the building.

The reopening of the consulate, which will issue visas to Iraqis, marked a “new phase” in relations between Riyadh and Baghdad, said Majid bin Abdullah al-Qasabi, Saudi Arabia’s trade minister.

“There’s no doubt that this exchange, this discussion, is a two-way street that will strengthen these ties,” Qasabi told reporters, wrapping up a two-day visit.

Saudi Arabia would provide Iraq with one billion dollars in loans for development projects, said Qasabi, plus $500m to boost exports and a gift of a 100,000-seat sports stadium to be built on Baghdad’s outskirts.

Saudi Arabia cut ties with Iraq when the latter invaded Kuwait in 1990.

Diplomatic relations resumed in 2015 when Riyadh sent an ambassador to Baghdad, and improved with the then-Saudi Foreign Minister Adel al-Jubeir’s visit in 2017, the first by a Saudi foreign minister since 1990.

But consular services remained suspended and Iraqis applying for visas had to go through the Saudi embassy in neighbouring Jordan.

“Today, our brothers in Iraq can acquire a visa in Baghdad directly, without having to suffer a trip abroad,” Qasabi said.

Qasabi said three more consulates were expected to open in Iraqi cities.

Qasabi said Saudi Arabia would provide Iraq with one billion dollars [The Presidency of the Republic of Iraq Office/Handout via Reuters]

The Saudi delegation met Iraq’s prime minister, Adel Abdul-Mahdi, and held talks with Iraqi businessmen and senior Iraqi officials towards boosting relations between the two countries.

Ahmad Sahhaf, spokesman for Iraq’s foreign ministry, said the consulate’s reopening on Thursday “will reflect positively on pilgrims and investors”.

Sahhaf told The Associated Press news agency that work was also under way to reopen border crossings between the two neighbours.

Iraq is caught in a tug-of-war over influence pitting Iran against the United States and Saudi Arabia.

Riyadh is seeking closer ties to Iraq to counter Iran’s growing influence in the region, while Baghdad seeks to attract Saudi investments to spur economic growth.

Abdul-Mahdi is visiting Iran on Saturday and plans to visit Saudi Arabia later this month, during which a number of trade agreements are expected to be signed.