Cairo: At the end of a rare visit to Egypt, a senior Iranian envoy yesterday said the two regional heavyweights are making progress in normalising diplomatic relations, cut nearly three decades ago over regional policy disagreements.

"There is no major problem and everything is moving forward," Ali Larijani, from Iran's powerful National Security Council, said after talks here with Egyptian Foreign Minister Ahmad Aboul Gaith.

Larijani, who is also a close aide to Iran's supreme leader Ayatollah Ali Khamanei, described the talks as "positive and constructive." Tehran cut diplomatic ties after Cairo signed a peace agreement with Israel in 1979 and provided asylum for the deposed Iranian Shah Mohammad Reza Pahlavi.

Iran's support for Iraqi Shiites, Lebanon's Hezbollah and Palestinian Hamas group has further deteriorated relations, resulting in very limited diplomatic contacts between the two countries.

Egypt has always maintained that normal ties with Iran would come only after Iran stopped meddling in internal affairs of Arab countries.

Larijani's visit comes amid a thaw between the two nations. It followed a visit last month to Tehran by Egypt's deputy foreign minister, Hussain Darar, and a preceding visit to Cairo in September by Darar's counterpart, Abbas Araghchi.

In May, Iranian President Mahmoud Ahmadinejad offered to restore ties with Egypt. At the time, Ahmadinejad said his country was ready to open an embassy in Cairo as soon as Egypt agreed to do the same in Tehran.

The Iranian president has since repeated his offer, most recently last Wednesday.

During an almost weeklong stay, Larijani met with top officials, including Egypt's powerful Intelligence Minister Omar Sulaiman, Grand Shaikh Mohammad Seyed Tantawi and other officials of Al Azhar, Sunni Islam's prominent religious centre. He also held talks with Amr Moussa, the secretary-general of the Cairo-based Arab League who urged better Arab ties with Tehran.

There were also reports that Tehran has agreed to provide Egypt with badly needed wheat, at lower prices.

However, some thorny issues still remain.

Aboul Gaith has said that full diplomatic relations could only be restored if Iran takes down a large mural of former Egyptian President Anwar Sadat's assassin, Khalid Al Islambouli, and change the name of a street honouring him.