Baghdad has been under pressure from Washington to limit ties with its neighbour, particularly after the United States withdrew from the Iran nuclear deal and hit Tehran with sanctions.

Speaking in a joint press conference with Iraq's top diplomat Mohammed Ali al-Hakim, Zarif said Sunday they had held "very good discussions".

The Iranian foreign minister thanked Iraq for having "refused the injust and illegal sanctions imposed on the Iranian people" in reference to the US measures.

Iraq was given limited waivers to continue buying electricity and natural gas to generate it from Iran, with Washington calling on it to partner with US companies to become energy independent.

After Turkey, Iran is the top supplier of imported goods to Iraq, and Rouhani said his discussions with Hakim covered sectors including trade and health.

Iran and Iraq plan to raise annual bilateral trade to $20 billion from the current level of $12 billion, according to Rouhani. The bulk of the trade balance is tilted toward Iran with gas and energy exports.

During his visit Rouhani is set to meet Iraqi Prime Minister Adil Abdul-Mahdi, President Barham Salih and the country's chief Shiite cleric Grand Ayatollah Ali Sistani, according to Iran government's website.

"Rouhani is coming to discuss... trade between the countries (and) the issue of easing trade exchanges in Iraqi local currency and finding other ways, like Germany and Britain, to adopt an alternative European currency to circumvent US sanctions," Iraqi political analyst Hisham al-Hashemi told AFP.

"In addition, there are electricity, water and other files," he added.