Relations between Britain and Iran deteriorated further today as Tehran fiercely denied claims that it had supplied sophisticated weapons used to kill British troops in southern Iraq.

Hamid Reza-Asefi of the Iranian Foreign Ministry appeared on national television to denounce as "fantasy" the allegations, made by an anonymous senior British official, that Iran had equipped the rebel militia in southern Iraq with sophisticated and powerful explosives.

"Britain's conspiracies have been revealed and its scandal in Iraq has made London make up this lie. The British are the cause of instability and crisis in Iraq. By drafting such scenarios they are trying to find a partner in their crimes," he said.

He added: "From the very beginning, we have stated our position very clearly - a stable Iraq is in our interests and that is what the Iraqi authorities have said themselves on many occasions."

Britain blames Iran’s Revolutionary Guard for supplying the advanced technology that had helped Iraqi insurgents to kill British soldiers with roadside bombs. The UK official said the bomb technology used against British forces in Iraq had come from the Tehran-backed Hezbollah militia in Lebanon, via Iran.

The most recent death was that of Major Matthew Bacon, of the Intelligence Corps, who died when a roadside bomb was detonated in Basra on September 11, destroying his armoured Land Rover.

It is the first time that the long-suspected link between the Iraqi insurgents and their neighbours has been declared officially. The United States has for some time been openly accusing Tehran of supporting and influencing the insurgents’ attacks on coalition troops in Iraq.

"We think it [the new technology] has come from Lebanese Hezbollah via Iran," the official said.

He said the Iranian action could be an attempt to warn off Britain over its demands that Tehran abandon its controversial nuclear programme. Negotiations have collapsed and Iran today said it was making steady progress on its uranium enrichment programme, which the West fears is a smokescreen for the development of nuclear weapons.

"It would be entirely natural that they would want to send a message, ‘don’t mess with us’. It would not be outside the policy parameters of Tehran," the official said.

Although Iran’s natural allies in Iraq would be the Shias, the official said he believed it would suit Iranian interests to work with Sunni insurgents.

Iran hit back swiftly, demanding evidence to back up the claims and accusing British intelligence agencies of fomenting terrorism in southern Iran.

Mr Reza-Asefi said: ""For sure there is no [evidence] because the British themselves are the cause of continuation of insecurity and instability in Iraq and a source of crisis in that country and are trying to blame others for what they do."

The spokesman stressed that Iran's policy toward Iraq is positive and all Iraqi officials have admitted Iran's constructive role there.

He said that dissidents from the Mehdi army, a militia controlled by the radical Shia cleric Moqtada Sadr, were suspected of carrying out the attacks.

One of their leaders, Ahmed al-Fartusi, was arrested by British forces recently and was "currently enjoying British hospitality", as the official put it. It was that arrest which sparked off an anti-British protest in Basra recently.

Earlier this year it was disclosed that British diplomats had protested to the Iranian Government after the seizure of arms being smuggled across the border into Iraq. Both London and Washington have also been urging the Iraqi Government to raise concerns with Tehran about suspected links with the insurgents.

The British official refused to be drawn on whether the Iranian Revolutionary Guard had been acting on the orders of the Tehran Government or operating independently.

The tit-for-tat accusations provided further evidence of a steady deterioration of ties between London and Tehran, strained over Britain’s role in Iraq and Iran’s nuclear programme.

Jack Straw, the Foreign Secretary, has devoted years of diplomacy to engage the regime in Iran. But relations have worsened since the surprise victory of President Ahmadinejad in elections this summer.

The hardliner has challenged efforts by the international community to contain Iran’s drive to convert and enrich uranium, which the West fears could be diverted to build atomic weapons

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