After a scheduled ceremony to ink several business deals was cancelled, officials from the two countries on Thursday put up a brave facade at the end of a two-day visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan.

"I think the security cooperation between the two countries is bearing fruit," Erdogan said.

Iran's Deputy Interior Minister for Security Affairs, Ali Asghar Ahmadi said Iran has agreed to put rebels from the former Kurdistan Workers' Party (PKK), now known as Kongra-Gel, on its list of terror groups.

Turkey in return would be putting the Iraq-based People's Mujahedeen(MKO) – Iran's main armed opposition group – on its terror list.

"Both Iran and Turkey have decided to brand the PKK and MKO as terrorist groups, and what was signed today stated that even if they continue to operate under different names, they will continue to be dealt with as terrorist groups," Ahmadi said.

Turkey and Iran have recently boosted cooperation on security matters, including against the ex-PKK, with Iranian security forces earlier this month launching a major crackdown on their members hiding in Iranian territory along the border with Turkey.

Trade disputes

The new found cooperation on security matters, however, failed to bring the two countries closer in resolving trade disputes.

"I think the security cooperation between the two countries is bearing fruit"

Recep Tayyip Erdogan
Turkish Prime Minister

Turkey has halted gas imports from Iran, complaining of poor quality and insisting on a reduction in price.

"The matter of gas has been dealt with," Erdogan said, but added Turkey and Iran's main gas companies still needed further discussions.

There was also no signing of a promised accord that would resolve an embarrassing spat over a contract to operate Tehran's new international airport won by a Turkish-led consortium.

Iranian Revolutionary Guards shut down the capital's new showpiece airport on 8 May after just one flight landed, arguing the contract with Tepe-Afken-Vie – an Austrian-Turkish consortium – endangered its security because the operators had business links with Israel.

During his visit, Erdogan met President Mohammad Khatami and the Iranian ministers of oil, defence and foreign affairs.