TEHRAN - Iran on Wednesday hailed a decision by Iraq's US-backed interim leaders to expel the Iranian armed opposition People's Mujahedeen, but denied suggestions of a secret deal involving the extradition of detained al-Qaeda members from the Islamic republic.

"The decision taken by the (Iraqi) Governing Council is very positive. We have been saying to the fighters not to be stubborn and to surrender, in which case we will show leniency," Intelligence Minister Ali Yunessi told reporters.

When asked if Iran could now hand over top members of al-Qaeda it says are in its custody, Yunessi said "there is no link".

"When it comes to terrorists, we do not do deals," added government spokesman Abdollah Ramazanzadeh.

"The judiciary will decide on what to do with them if they have not committed crimes against Iranians and if there are no Iranian complaints against them," he added, repeating statements that some detained al-Qaeda members here could be tried in Iranian courts.

Several Western diplomats have said Iran has been resisting handing over top-ranking al-Qaeda fugitives, complaining that the United States had failed to deal with the People's Mujahedeen after the invasion of Iraq.

"We have very good relations with the Governing Council, and we have had discussions (on the People's Mujahedeen) and this decision is the result," added Vice President Mohammed Ali Abtahi.

Iraq's interim Governing Council decided unanimously Tuesday to expel several thousand members of the People's Mujahedeen, branding the Iranian opposition force a "terrorist organisation".

The statement did not say where the people would be sent when they are expelled, but that its offices would be closed and its arms and financial resources confiscated.

The money would "be given to the compensation fund for victims of the former fascist regime" of Saddam Hussein.

The People's Mujahedeen, or Mujahedeen-e Khalq Organization (MKO) set up base in Iraq in 1986 and carried out regular cross-border raids in Iran, with which Iraq fought a bloody war between 1980 and 1988.

Several thousand Mujahedeen militiamen were disarmed by US forces following the fall of Baghdad in April and barred from undertaking military operations.

Around 4,000-5,000 people were grouped in Camp Ashraf, the main Mujahedeen base in Diyala province northeast of Baghdad, where they were screened for terror activities.

The US army announced in September that it had detained 3,856 members of the Mujahedeen.

The group kept out of the US-led war, although its bases were bombed by US warplanes. After lengthy negotiations, it struck a deal with the US-led coalition and withdrew to Camp Ashraf.