Iran accused the United States of terrorist acts in Iraq during an international meeting yesterday aimed at discussing security cooperation in the war-torn country.

"To create a safe haven for those terrorists who try to turn Iraqi territory into a base for attacking Iraq's neighbours should be condemned," Iranian Foreign Minister Manouchehr Mottaki said at the conference.

A spokesman for the Iranian delegation at the two-day conference on Iraq being held in the Egyptian resort of Sharm el-Sheikh confirmed that Mottaki was referring to the United States.

"Mr Mottaki was referring to countries which, like the United States, carry out acts of terrorism in Iraq," he told AFP.

"When the United States arrests five Iranian diplomats in Iraq, it is an act of terrorism," he said on

condition of anonymity.

The US commander in Iraq, General David Petraeus, told reporters at the Pentagon that American forces were holding seven Iranians captured in Iraq as suspected members of the covert Qods Forces of Iran's Revolutionary Guard.

On January 11, US troops dropped from helicopters and stormed an Iranian liaison office in Arbil, the capital of the northern Iraqi Kurdistan region, and detained six employees, one of whom was later released.

The United States has said the men had links to Iran's elite Revolutionary Guards and none of them held diplomatic passports.

It is not clear where and when the other two Iranian detainees mentioned by Petraeus were arrested.

The arrests came amid continued accusations by US commanders that Tehran is arming Shia

militias and inciting anti-US attacks.

Tehran denies any involvement in the violence, while complaining that armed Iranian opposition groups such as Pejak -- a Kurdish guerrilla movement -- are allowed to operate from Iraqi soil.

In his speech Mottaki described the detention of the Iranians as a "brazen contravention of international conventions, the breach of Iraq's sovereignty and obvious dishonouring of the Iraqi people and government."

Mottaki's comments appeared to dash hopes of a rapprochement between Iran and the US, whose top diplomats had a brief exchange over lunch on Thursday.

Speculation had mounted in recent days over possible direct talks between Rice and Mottaki, in what would have been the highest-level bilateral discussions between the two countries since they broke off ties in 1980.