TEHRAN (Reuters) -- An Iraqi Governing Council delegation arrived in Tehran on Monday for talks on political and economic cooperation including Tehran's offer to help rebuild its warn-torn neighbor through an energy swap.

The Iraqi delegation, led by Governing Council President Jalal Talabani and five ministers will spend two days in talks in Tehran before heading to Turkey.

"As Iraq's neighbor we cannot remain indifferent towards development in Iraq," Iran's Foreign Minister Kamal Kharrazi told reporters after meeting the Iraqi officials at Tehran's Mehrabad airport.

Tehran is aiming to bolster ties with Iraq through an exchange that could help boost crude oil export revenues urgently needed to fund Baghdad's reconstruction.

"We're very serious about this proposal. We would not have made it otherwise," an Iranian oil industry source told Reuters.

Iran and Iraq as two major oil producers already have gone some way towards rapprochement after Saddam Hussein waged war with Iran from 1980 to 1988.

Tehran first extended its energy swap offer to Baghdad at an OPEC meeting in Vienna in September. It was made public at last month's international donors conference in Madrid.

The Iranian oil industry source said Tehran was willing to take delivery of 350,000 barrels per day of Iraq's Basra Light crude into its Abadan refinery in southwestern Iran.

The equivalent amount of Iranian Light crude could then be sold on behalf of Baghdad via Iran's Kharg Island terminal in the Persian Gulf.

Iran is also prepared to trade gas, liquefied petroleum gas (LPG) and electricity and share industry expertise with Iraq, said the oil source.

Iraqi Oil Minister Ibrahim Bahar al-Uloum was not among the original delegation which arrived in Tehran on Monday but may join it later in the day, an Iraqi official told Reuters in Tehran.