Iraq’s foreign minister has told the Wall Street Journal that he is optimistic that Iraq and the U.S. would be able to finalize a long-term security agreement by the July 31 deadline, citing a new "flexibility" by the Bush administration.

Hoshyar Zebari told the paper that the U.S. is dropping a demand for immunity for American security contractors, and agreeing to create a U.S.-Iraqi operations center that gives Iraqi officials more input into future American military moves there.

But in the interview, Zebari made clear that the two sides remain divided over parts of the deal, which is designed to establish a legal framework for American military operations in Iraq after a U.N. mandate expires at year’s end.

Zebari said the biggest points of contention were how many bases the U.S. would be allowed to maintain in Iraq long term, and whether the U.S. military would retain the power to arrest Iraqi civilians and keep them in U.S. detention facilities, the Journal reported. He said, however, that the U.S. had expressed a new willingness to accept limitations on its ability to detain and question Iraqi nationals.

The two sides also differ on whether U.S. troops will be immune from prosecution under Iraqi law, according to the report.

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