By Jonathan Landay
RIYADH (Reuters) - Saudi Arabia and Iraq convened a new joint body to coordinate their fight against Islamic State and on rebuilding Iraqi territory wrested from the group, the Saudi King Salman and Iraqi Prime Minister Haider al-Abadi said in Riyadh on Sunday.
The rare senior meeting, signaling a thaw between states that have been at loggerheads for decades, was also attended by U.S. Secretary of State Rex Tillerson, who praised the accord between the two close U.S. allies.
"The joint coordination council will not only lead to closer cooperation in the fight against Daesh, but will also help support the rehabilitation of facilities and infrastructure in the areas liberated," Tillerson told reporters.
"The council will also contribute to reforms that will grow and diversify Iraq's private sector. Such reforms will encourage the foreign investment that is vital to Iraq's reconstruction efforts. This will be critical to winning the peace that has been earned through the hard-fought military gains."
Iraqi forces armed largely by the United States ejected the ultra-hardline Sunni Muslim militant group from Mosul and other cities in northern Iraq this year, but the fighting left whole neighborhoods in ruins and has hit Iraq's economy.
The U.S. is concerned that Iran, a Shi'ite regional rival also allied to Iraq, will take advantage of gains against IS in Iraq and neighboring Syria to expand its influence, which is opposed by Gulf Arab states.
Saudi Oil Minister Khalid al-Falih visited Iraq on Saturday to call for increased economic cooperation and praise existing coordination to boost crude oil prices, the first Saudi official to make a public speech in Baghdad for decades.
Tillerson's six-day trip will also take him to Qatar, Pakistan, India and Switzerland.
(Writing by Noah Browning; Editing by David Goodman)