By Aseel Kami

BAGHDAD, March 3 (Reuters) - Iraqis were torn between deep-seated suspicions of their old foe Iran and relief that ties were on the mend after Iranian President Mahmoud Ahmadinejad wrapped up a visit to Baghdad on Monday.

Ahmadinejad was the first Iranian president to visit Iraq since the two neighbours fought a bitter eight-year war in the 1980s in which 1 million people were killed.

Iraq's leaders welcomed him amid much fanfare on Sunday, symbolising the closer links between the two neighbours' Shi'ite-dominated governments. But while Iran and Iraq have historical economic, political and cultural links, the physical and emotional scars from the war also run deep.

"I was from the generation that was raised to hate Iran, the government and the people, despite the fact I didn't meet Iranians until recently," Fawzi al-Hindawi wrote in an opinion piece for the independent Azzaman paper.

"But the negative image planted in my mind about Iran was very strong and effective, and it is still effective even after the end of the Iraq-Iran war," he said.

Washington accuses Tehran of meddling in Iraqi affairs and backing Shi'ite militias, charges Tehran denies but some Iraqis also believe are true.

Hundreds of minority Sunni Arabs, dominant under Saddam Hussein, protested in Falluja west of Baghdad against Ahmadinejad's visit, calling for Iran to get its "non-Arab hands" off Iraq.

"The Persian hatred for Iraq is great, and in the Iraq-Iran war many women lost their sons and husbands. This visit is for Iran's interest alone," said Bassam Mohammed, a student from Saddam's Sunni-dominated home town of Tikrit.

Abu Ahmed, 40, the Shi'ite owner of a Baghdad supermarket, agreed. "This visit will not do any good for Iraq. Maybe it will bring benefits to them (to the Iranians) but not for Iraq ... I believe the visit is to settle scores."

VISIT "UNWELCOME"

Shi'ite Abu Amjad, a goldsmith, said the visit would only highlight divisions between sects and between Iran and the United States.

"It is an unwelcome visit and the most important reason is the painful past between the Iranian government and the Iraqi people," he said. "These are not good circumstances to start a new phase of relations."

Other Iraqis, however, were pleased by the improved relations represented by Ahmadinejad's visit. Iran and Iraq signed seven agreements to cement economic and trade links, and many said close ties were key to their future.

"Relations must improve with Iran. We have Shi'ites, they have Shi'ites, we have Sunnis, they have Sunnis. Travel between the two countries must be made easier for tourism," said Ali Gassam, 40, a Sunni civil servant from Samarra.

Mohammed Younes, who runs a shop selling women's clothes in Samarra north of Baghdad said he missed the business from Iran.

"When the Iranians used to come I'd earn $500 each day. After the Iranians stopped coming I earned $20 a day," he said.

Better ties with Iran were also a chance to bury old animosities and begin afresh, said Usama Hussein, the 28-year-old owner of a clothes shop in Iraq's holy Shi'ite city of Najaf.

"We do not want to return to the past and its complications. Let us turn a new page," she said. (Additional reporting by Khaled Farhan and Mohammed Abbas; Writing by Michael Holden)

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