By Khaled Yacoub Oweis

DAMASCUS, April 17 (Reuters) - Iranian Foreign Minister Manouchehr Mottaki met his Syrian counterpart Walid al-Moualem on Tuesday to coordinate policy on Iraq ahead of an international meeting next month to discuss the conflict there.

"Iraq is in extraordinary circumstances and we hope that neighbouring countries continue to do their best for security and stability there," Mottaki told reporters after a late meeting with Moualem at the Foreign Ministry.

"We have been in touch about Iraq and there is agreement to keep up dialogue between us," said Mottaki, who arrived in the Syrian capital after holding similar discussions in Turkey.

Egypt will host a high-level meeting of a group of countries that includes Syria, Turkey and the United States in the first week of May to discuss how to stop the violence in Iraq. The conference is a follow-up to one in Baghdad in March.

Mottaki said Iran, which was present at the Baghdad conference, had not yet decided whether to attend.

"We are studying the issue and there is still plenty of time to take a decision," he said.

An Iranian newspaper reported last week that Iran might not take part if U.S. forces do not release five Iranians they are holding in Iraq.

The United States accuses Iran and Syria of furthering instability in Iraq, but the Baker-Hamilton panel in December recommended that Washington talk with the two countries about stopping the violence.

FEARS OF IRAN

During a meeting between President Bashar al-Assad and Iranian President Mahmoud Ahmadinejad in Tehran in February, the two leaders stressed that the identity of Iraq was Arab, to allay fears in the region of expanding Iranian influence there.

Syria has been reinforcing links with Iran as the two countries come under pressure from Washington. Senior U.S. politicians who visited Damascus lately have urged Assad to distance himself from Tehran.

Western diplomats said Assad had told visiting delegations that U.S. pressure left him with little choice but to make a closer alliance with Iran, but that Syria was ready to help end the violence in Iraq.

Washington says Syria is allowing anti-U.S. fighters to cross from its border into Iraq. Syria denies helping the rebels and says a stable Iraq is in its interest.

A fiercely anti-American newspaper published in Damascus by Iraqi Member of Parliament Mishaan al-Jubouri was recently shut down and senior Iraqi officials have been visiting Damascus.

"There has been less movement and supply across the border from Syria," one diplomat said. "This may be more due to the fact that the insurgents are becoming self-sufficient than anything Syria is doing."

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