Iran\'s President Mohammad Khatami has arrived in Azerbaijan\'s capital, Baku, for a two-day visit. He is meeting his Azerbaijani counterpart, Ilham Aliyev, and signing a raft of bilateral agreements bolstering economic, educational and cultural co-operation between the two states. This is President Khatami\'s first ever visit to Azerbaijan, Iran\'s crucial strategic neighbour. The most important issues on the agenda will be regional security and disputed territorial rights over the oil-rich landlocked Caspian Sea. Azerbaijan and Iran\'s shared border runs across important oil reserves. The two countries, however, share more than just a frontier. Nearly 20% of Iran\'s population are ethnic Azeris and in both countries Shia Islam is the dominant religion. Nevertheless past relations have been frosty. Tehran has expressed concern over Baku\'s pro-Western stance. Azerbaijan is America\'s ally in the \"war on terror\" and Washington is backing a major oil pipeline project in the region. For its part, Baku is worried about the possible spread of Islamic fundamentalism in Azerbaijan. For all these reasons, few expect President Khatami\'s visit to bring major changes, although analysts say any co-operation with Iran is important for the security of this extremely fragile region. (BBC)