Allawi hailed in a Press conference the WTO's decision to grant Iraq observer status as marking its "return to the world community," but added that the future talks on membership would not involve the oil sector.

A membership "would not mean a WTO involvement in how we develop our oil ressources," he said.

He said membership "will allow us to create a trade and legal environment favourable to Iraqi businessmen."

Iraq's admission as observer to the WTO was made possible by the lifting of 13-year UN sanctions in May, following the ousting of Saddam Hussein.

Iraq's 112.5 billion barrels of oil reserves are the world's largest behind Saudi Arabia. In October, the interim Iraqi government opened all economic sectors to foreign investments except natural ressources including oil.

Iraq's observer status is a first milestone in the long road to joining the 146-member group and reviving its foreign trade. The decision was taken at a meeting of the organisation in Geneva.

Observer status at the WTO lasts five years and allows countries to get a feel for the organisation and rules governing fair trade among the 146 member states, including major markets such as the United States, the European Union and China. At the end of the period a country may make a request for membership.