MOSCOW - Russia reported a breakthrough in talks with the United States on Thursday on a revision of U.N. sanctions against Iraq, and said their joint position now had only to be finalised by the U.N. Security Council.

After two days of consultations between U.S. and Russian experts on revised sanctions regulations for Iraq, the Russian Foreign Ministry said: "Substantial progress has been achieved in agreeing the basic parameters of the future programme."

It said the draft documents would now be sent to the United Nations for all members of the Security Council to consider and for appropriate resolutions to be adopted.

The two sides, which opened their new round of talks on Wednesday, had been negotiating on a "goods review list" of supplies that cannot be exported to Iraq without approval by the U.N. Security Council.

Iraq, a close economic partner of Russia, has been under Security Council sanctions since shortly after it invaded Kuwait in August 1990.

Russia and the United States had agreed that the revised list of restricted goods, part of moves to ease the flow of civilian supplies to Iraq while stopping military equipment, should be ready by the end of May.

Items not on the list can, however, go to Iraq without Council scrutiny after approval from U.N. officials under an oil-for-food humanitarian programme up for renewal at the end of May.

There was no immediate word on the detail of the agreement between the two sides. Moscow has lucrative oil projects with Iraq which it is keen to safeguard.

The negotiations, involving U.S. Assistant Secretary of State John Wolf and senior Russian Foreign Ministry official Yuri Fedotov, took place against a background of strong anti-Iraqi rhetoric by U.S. President George W. Bush.

Bush has said Saddam Hussein's Iraq is part of a three-pronged "axis of evil", fuelling speculation of a possible U.S. strike against Baghdad as part of the "war on terror" - an uneasy prospect for Moscow which has strong ties with Iraq.

AGREEMENT SOUGHT BEFORE SUMMIT

Both sides wanted agreement on the issue before Bush's May 23-26 summit with Russian President Vladimir Putin in Moscow and St Petersburg.

Iraq has objected to any change in sanctions procedures, saying they will lock the embargoes in place rather than lift them. U.N. officials expected Moscow's negotiators to make sure some key projects with Iraq were not on the goods review list.

Russian companies already control about one-third of Iraq's multibillion-dollar oil export market and the Russian government is trying to recover around $7 billion in loans made to Iraq in the 1980s for the purchase of Russian arms.

The United States has stopped $5 billion worth of contracts of goods Iraq has ordered, including some $900 million in Russian deals.

Interfax news agency quoted informed sources as saying the U.S.-proposed goods review list ran to thousands of pages enumerating goods it wanted to remain subject to the embargo.