France and Abu Dhabi are set to sign an agreement granting France a permanent naval base in the Gulf Arab emirate, a report said.

French President Nicolas Sarkozy is due to visit the United Arab Emirates on Tuesday and the Le Monde newspaper said the deal should be signed then.

The French Defence Ministry declined to comment on the report.

"France and Abu Dhabi should sign a memorandum with a view to create a permanent French naval base in this emirate," Le Monde said, without mentioning its sources.

It added that the base would be France's first in the Gulf. Abu Dhabi lies across the Gulf from Iran and near the sensitive Strait of Hormuz waterway, where US ships had a close brush with Iran earlier this month.

UAE officials were not immediately available for comment.

France's nearest base is in Djibouti at the Horn of Africa.

Washington says Iranian boats aggressively approached three US Naval ships in the Strait of Hormuz, a major oil shipping route off Iran's coast, and threatened that the ships would explode.

The United States says the incident almost led to an exchange of fire, and US President George W Bush said it was "a provocative act".

Sarkozy said in a magazine interview last month that there is a real risk of war with Iran, and Israel, rather than the United States, was the country most likely to launch an attack on the Islamic Republic. - Reuters