Iranian president vows to boost trade with Pakistan to $10 billion a year

ISLAMABAD (Reuters) - Iran's President Ebrahim Raisi and Pakistan's Prime Minister Shehbaz Sharif vowed on Monday to boost trade between the neighbouring nations to $10 billion a year, as Raisi commenced a three-day visit amid tight security in the Pakistani capital.

The visit comes as the two Muslim neighbours seek to mend ties after unprecedented tit-for-tat military strikes this year.

"Both sides agreed to increase the volume of bilateral trade to 10 billion U.S. dollars in the next five years," Sharif's office said in a statement after a joint news briefing.

"They also agreed to cooperate in developing joint approaches to confront common challenges including the threat of terrorism," the statement said.

Official figures for current annual trade were not available. Local media outlet Business Recorder, citing Iran's then-ambassador to Pakistan, last year reported bilateral trade worth over $2 billion.

Raisi, who was accompanied by a delegation that included the country's foreign minister and cabinet members, will next visit the eastern city of Lahore and southern port city of Karachi.

Major highways in Islamabad were blocked as part of security measures for Raisi's arrival, while the government declared a public holiday in Karachi and Lahore.

While Raisi's visit is a key step towards normalising ties with Islamabad, Iran's Supreme Leader Ayatollah Ali Khameni, not the president, has the last say on state matters such as nuclear policy.

Tensions have also been high in the Middle East after Iran launched an unprecedented attack on Israel a week ago and central Iran in turn suffered what sources said was an Israeli attack on Friday.

Pakistan has previously called for de-escalation from "all parties."

Sharif lauded Iran at the news briefing for taking a strong stance on the humanitarian situation in Gaza, and called for an immediate cessation of hostilities there.

Sharif called on Muslim countries to unite and raise their voice for an end to the conflict.

Pakistan and Iran have had a history of rocky relations despite a number of commercial pacts, with Islamabad being historically closer to Saudi Arabia and the United States.

Their highest-profile agreement is a stalled gas supply deal signed in 2010 to build a pipeline from Iran's South Fars gas field to Pakistan's southern provinces of Balochistan and Sindh.

Despite Pakistan's dire need of gas, Islamabad has yet to begin construction of its part of the pipeline, citing fears over U.S. sanctions - a concern Tehran has rejected.

Pakistan said it would seek waivers from the U.S., but Washington has said it does not support the project and warned of the risk of sanctions in doing business with Tehran.

Despite facing possible contract breach penalties running into the billions of dollars, Islamabad recently gave the go-ahead for construction of an 80-km (50-mile) stretch of the pipeline.

(Reporting by Charlotte Greenfield and Gibran Peshimam; Editing by Clarence Fernandez and Bernadette Baum)