LONDON (Reuters) -Iraq and Britain have agreed on a trade package worth up to 12.3 billion pounds ($14.98 billion) and a bilateral defence deal, the Iraqi and British prime ministers said in a joint statement on Tuesday.

The deal, envisaging more than 10 times the total of bilateral trade in 2024, was announced after a meeting between Iraqi Prime Minister Mohammed Shia al-Sudani and British counterpart Keir Starmer at the latter's Downing Street offices.

It includes a 1.2-billion-pound project in which British-made power transmission systems will be used for a grid interconnection project between Iraq and Saudi Arabia, as well as a 500-million-pound plan to upgrade the Al-Qayyarah air base in northern Iraq.

A water infrastructure project by a UK-led consortium that will help provide clean water in arid southern and western Iraq is also part of the deal, the statement said. The project would be worth up to 5.3 billion pounds in UK exports.

Sudani and Starmer also signed a defence deal that "establishes the basis for a new era in security cooperation".

Sudani said earlier that the UK-Iraqi security deal would develop bilateral military ties after last year's announcement that the U.S.-led coalition set up to fight Islamic State would end its work in Iraq in 2026.

The Iraqi premier began an official visit to the United Kingdom on Monday amid historic geopolitical shifts in the Middle East.

Iraq is trying to avoid becoming a conflict zone once again amid a period of regional upheaval that has seen Iran's allies Hamas degraded in Gaza and Hezbollah battered in Lebanon during wars with Israel, and Bashar al-Assad toppled in Syria.

($1 = 0.8212 pounds)

(Reporting by Timour Azhari in London and Jaidaa Taha; Writing by Menna Alaa El-Din; Editing by Hugh Lawson)