Iran and Iraq have formed a joint committee with the Red Cross to shut down Camp Ashraf in Iraq which houses thousands of outlawed Iranian opponents, Iraqi President Jalal Talabani said on Saturday.

"The camp will be shut down by the end of this year," Talabani said on the sidelines of a counter-terrorism summit in Tehran, the official IRNA news agency reported.

"For this, a tripartite committee has been set up by Iraq, Iran and the International Red Cross to make decisions and follow up on necessary measures to shut down the camp of this terrorist group," IRNA quoted him as saying.

The People's Mujahedeen established Camp Ashraf in the 1980s -- when now-executed Iraqi dictator Saddam Hussein's regime was at war with Iran -- as a base from which to launch military action against the Islamic republic.

Camp Ashraf, is now home to some 3,400 people.

The People's Mujahedeen, which describes itself as both left-wing and Islamic, opposed the shah of Iran and now seeks to oust the clerical regime that took power in Tehran in the 1979 revolution.

Iranian intelligence minister Heydar Moslehi said the Mujahedeen was on the verge of "collapse," and added that his agencies were taking "measures" to speed up the process, the Mehr news agency reported.

"On this issue, (the intelligence apparatus) have had discussions with officials in Iraq to resolve the future of the camp Ashraf as soon as possible," Moslehi said, also speaking on the sidelines of the summit.

But he also extended an olive branch to Mujahedeen members who part ways with the group.

"Islamic leniency awaits those members of this terrorist group who leave it or escape Camp Ashraf and return to the arms of the Islamic republic of Iran's regime," Moslehi said.

Iraqi Foreign Minister Hoshyar Zebari had proposed during a Tuesday visit to Tehran the formation of a tripartite committee to "resolve the issues of Camp Ashraf."

"We have asked international organisations and European parliaments to encourage the (group's) members to leave Iraq, and to facilitate (the movement of) those members who seek to go those countries," Zebari said.

The announcement was met with a "vigorous" condemnation by the National Council of Resistance of Iran, the broad grouping that includes the People's Mujahedeen.

The NCRI said allowing Iran to "interfere in the issue of Ashraf is a red line that should not be crossed," and urged the International Committee of the Red Cross "not to lose credibility by participating in this plan of repression."

"The UN and the US government must take responsibility to protect the unarmed and defenceless people at Ashraf, and they will be held responsible for any attack that will target them," the NCRI warned in a statement.

Camp Ashraf has become a mounting problem for the Iraqi authorities since US forces transferred security for the camp in January 2009, and amid pressure from Tehran to hand over the members of the militant group.

On April 8, Iraqi security forces carried out a deadly raid on the camp, killing 34 members of the group.

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