In a symbol of the newfound cooperation between the longtime foes, a team of US firefighters joined their Iranian counterparts late Wednesday in a last-ditch search for survivors amid the mudbrick rubble of this historic town.

Newspapers reported five cases of near miraculous escapes, including a baby and young girl pulled out of the ruins, five days after the disaster struck.

Around 26,500 bodies have been buried so far, the spokesman for the Kerman provincial government, Assadollah Iranmanesh, told AFP, lowering earlier estimates. "This figure is not expected to change much."

The interior ministry did not confirm the figure and cautioned that several evacuated survivors could have died of their injuries in hospitals in other provinces.

During a tour of the area on Tuesday, President Mohammad Khatami estimated a final death toll of 40,000, more than the 37,000 killed in June 1990 quake in northwestern Iran.

A strong wind only made matters worse for survivors in Bam who have been sleeping six or seven in white tents hastily erected amid the rubble of the town and its flattened citadel, once the world's largest mud-built fortress.

With most houses reduced to piles of bricks, people huddled around camp fires under grey skies as the wind whipped up clouds of dust.

Traffic on the roads was busy as mechanical diggers and bulldozers were moved around Bam, and those who had families to go somewhere else loaded what belongings they still had into vans and lorries.

Sixty US medical specialists, including seven surgeons, were to set up a field hospital in the centre of the city, where only a few buildings have been left standing.

The medical team, along with some 20 specialists from USAID, a government body, are the first official US representatives to set foot in Iran since diplomatic links were broken more than 20 years ago.

US officials said Washington was poised to annnounce a suspension of currency restrictions and other sanctions on Iran to ease the work of US aid agencies in assisting the relief effort.

The suspensions, which will apply only to US non-governmental organizations (NGOs), were to be formally announced later Wednesday or Thursday by the Treasury and State Departments, one official told AFP on condition of anonymity.

"The order has gone out to get this done fast," one official said.

The move, the latest in series of US outreach efforts to its longtime foe, will allow US employees of US NGOs to travel to Iran and spend US currency there without special permission from Washington, the officials said.

In addition, the decision is expected to include a temporary waiver on a requirement for a licence for NGOs to bring medicine and certain medical equipment into Iran, the officials said.

Under current regulations, overseen by the Treasury Department's Office of Foreign Assets Control (OFAC), such actions are now illegal without federal approval and punishable by hefty fines.

The firefighters from Fairfax County, Virginia, joined up with dozens of Iranians in searching the debris of a house where voices were believed to have been heard.

Surrounded by a crowd of onlookers, the firemen spent several hours digging and listening before a mechanical digger set to work tearing up the base of what was once a brick house.

In the provincial capital of Kerman, less than 200 kilometres (120 miles) from Bam, where the ferocious quake with a magnitude of 6.3 struck on Friday, snow on the ground and fog delayed aid flights.

Despite dimming hopes, five survivors were rescued from the ruins on Tuesday, four of them in the nearby village of Baravat, Iranian newspapers said. Among them was a four-month-old infant and a 12-year-old girl.

The girl was trapped in the kitchen when the killer quake struck and was able to find enough food to survive for almost five days, according to the reports, which gave no further details.

Iran's health ministry, quoted by IRNA, said the disaster left 14,360 injured, of whom 8,500 have been hospitalised in the city of Kerman, in Tehran and other provinces.

It said 2,000 showers and 15,000 toilets are needed to help prevent the outbreak of epidemics.

The World Health Organisation expressed grave concern about the conditions facing survivors and launched an appeal for 3.5 million dollars (2.8 million euros).

With the world mobilized, about 130 planes from 40 countries have flown in emergency aid and equipment, while 1,700 foreign rescue workers have also rushed in.

Iranian officials gave out small bouquets of roses for New Year's Eve to members of international rescue teams.

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TERRA.WIRE