Turkish TV said the deal would be signed on Friday morning.

Iran's foreign minister Kamal Kharrazi reiterated compensation call

The memorandum envisages "simultaneous operations by both countries' armies on their own territory to eliminate terrorist activities along the border", the semi-official Anatolia news agency said.

High-ranking military officials are to keep direct and continuous contact in a bid to implement the memorandum, it added.

However one controversial issue has been excluded from the memorandum - Iran's official protest last month that Turkish jets had bombed its northwest border region of Piranshahr, killing five people.

Earlier on Thursday, Iranian radio said the talks had "hit some snags" over accusations that Turkish forces crossed the border into Iran during operations against Kurdish guerrillas, and Iranian claims for compensation.

Iranian Foreign Minister Kamal Kharrazi reiterated the call for Ankara to "accept responsibility and pay reparations" for the alleged attack.

Turkey has denied all accusations that it attacked over the Iran border, saying it struck a Kurdish rebel camp in neighbouring northern Iraq.

Tension decreased somewhat on Monday when Iran released two Turkish soldiers it had been holding captive for more than a fortnight.

Incursions

Turkish troops watch the eclipse, after the release of two comrades on Monday

Tehran alleged that the soldiers had been part of a larger force which had tried to cross the border in the Qator region, but had been repulsed.

Turkey said they had crossed unintentionally, and had been targeting Turkish Kurd rebel positions in northern Iraq.

Ankara has alleged that Kurdish PKK rebels sought refuge on Iranian territory, while Tehran has said anti-Iranian groups have been operating in Turkey.

There have been recent diplomatic and Turkish press reports that the PKK has established bases over the border inside Iran, though Tehran denies this.

Accusations of Iranian support for dissident Kurds and Islamists in Turkey have long been a bone of contention.

Iran is also extremely wary of Turkey's growing military and political relationship with Israel, as well as its close ties with Washington.

There are estimated to be approximately 10 million Kurds in Turkey and about half that number in Iran.