IRAQ?S border with Saudi Arabia will remain closed to business for now on security grounds despite requests from Saudi businessmen to boost direct trade between the two neighbours, a senior US official said. Assistant Secretary of Commerce William Lash said security concerns on the Iraqi side and a shortage of US-led occupying troops meant the frontier at the border town of Arar may open only to allow Muslim pilgrims into Saudi Arabia early next year.

?There are no plans to open the border at Arar to commercial traffic. There is a goal to have the border open to accommodate traffic of pilgrims to the Haj,? Lash told Reuters in an interview late on Saturday.

Lash was visiting Saudi Arabia as part of a tour to promote trade between post-war Iraq and its Gulf Arab neighbours.

Saudi businessmen have had to find circuitous trade routes to Baghdad ever since the border was closed following Iraq?s 1990 invasion of Kuwait.

But they say the detours via Jordan or Kuwait now add an unnecessary 12 to 15 percent on costs and hinder business and trade with a potentially lucrative market on their doorstep.

?There are 40 to 50 trucks every day that clearly move to Iraq through Jordan or Kuwait ? with food, medicines and building material like irrigation systems, cables, air conditioners and pipes,? said Abdulrahman al-Zamil, president of the export centre at the Saudi Chamber of Commerce.

Zamil said ending the border closure would free up Saudi Arabia?s major Red Sea and Gulf ports for Iraq-bound goods. The road from Saudi Arabia to Baghdad was also safer and shorter than the land route from Jordan, he said.

But Lash said it was too early to respond to Saudi calls.

?While there are clear advantages to speed, supply and access, there is also right now a very serious security concern on the Iraqi side of the border and we currently do not have enough personnel to secure that side of the border,? he said.

Attacks on US-led troops in Iraq take place daily. At least 74 US soldiers were killed in action last month.

?The goal is to have the border open early next year for the pilgrimage,? Lash said. ?It would be irresponsible to set a particular date on (opening for trade).?

Iraq and oil-rich Saudi Arabia share a 500 mile (800 km) border.

Reconstruction contracts

The US Defense Department is expected to release in the coming week details of $18.6 billion reconstruction contracts on offer in Iraq. The details were due to have been announced on Friday but were delayed.

Two Saudi companies, National Catering and Tamimi Global, were awarded subcontracts by the US construction giant Bechtel in May to build work bases in Baghdad and Umm Qasr.

?We believe that this next round of procurement... will give even more opportunities for Saudis to play a role, in procurement as well as in direct trade,? Lash said.

But Saudi businessmen appear wary of long-term investment in Iraq until greater security is guaranteed and a clearer picture of the country?s future government emerges. Until then investors fear their deals could be revoked by a successor administration.

Zamil said the current lack of customs tariffs also meant there was little incentive to set up business in Iraq when locally produced goods could be swamped by cheap imports.

Lash said the United States was trying to build up a customs regime and train officials, and that a five percent levy would be charged on imports in future.

?Iraq will have emerging market risk like any other emerging market,? he said. ?But Saudi business people, given their longstanding relationships and natural competitive advantages, are dealing with a market they know well.?

Dominic Evans