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The US military commander in Iraq has claimed Tehran's ambassador to Baghdad is part of al-Quds force, an elite wing of the Iranian Revolutionary Guards which Washington wants to designate as "terrorist".
General David Petraeus implicated the Tehran government in the assassination of provincial Iraqi governors while adding that Hassan Kabuki-Qomi, Iran's envoy to Baghdad, "is an Quads force member".
Speaking over the weekend at a base near the Iranian border, he said Revolutionary Guards had been "responsible for providing the weapons, the training, the funding and in some cases the direction for operations that have killed US soldiers".
Ryan Crocker, the US ambassador in Baghdad, has this year met Mr Kazemi-Qomi twice to discuss ways to stabilise Iraq. But the talks made little headway and President Bush has since said he is ready to "confront Tehran's murderous activities".
Gen Petraeus's comments represent an escalation in this war of words amid fresh claims that Iran's continued interference in Iraq - routinely denied by Tehran - could trigger American military action across the border.
The US is already holding several Iranians, including the "Irbil Five" seized in January from the country's liaison office in a northern Iraqi town, whom the Pentagon says are members of al-Quds. Tehran claims they are diplomats who were captured illegally.
Despite hints the US State Department might negotiate their release, Gen Raymond Odierno - the number two American commander in Iraq - told reporters last week: "Militarily, we should hold on to them."
The 125,000-strong Iranian Revolutionary Guards Corps (IRGC), particularly the al-Quds force, are accused by Washington of not only helping Shia militias in Iraq but also aiding Hezbollah in Lebanon, Hamas in Gaza and the Taleban in Afghanistan.
Proposals were recently leaked in Washington to brand the IRGC as a "designated global terrorist" organisation, putting it on a par with al-Qaeda. This has not yet been confirmed officially because of legal and diplomatic difficulties.
On Friday, American forces killed 25 people in an assault on the village of Jizan al-Imam, northwest of Baghdad, aimed at a militia commander known to have ties to al-Quds Force agents. The Iraqi government said most of the victims were civilians.
The latest edition of New Yorker magazine reported that Mr Bush had ordered plans for a possible air strikes on Iran be revised so that they focus on destroying the IRGC - as a defensive counter-terrorism operation - rather than Tehran's bitterly-contested nuclear programme.
British sources yesterday cast doubt on claims that Gordon Brown had told Mr Bush he was "on board" for such action inside Iran. One pointed out that a military operation "might achieve the direct opposite of the stated objective - which is to stabilise Iraq".
However, another UK official said: "There has certainly been an awful lot of rhetoric over the past few weeks about Iran's meddling in Iraq. I cannot say, and I do not know, where that will lead."
Both London and Washington have sought to play down recent speculation that Mr Bush is preparing to order air strikes against uranium enrichment operations in Iran which the West believes is being used to build a nuclear weapon.
The White House, though frustrated with the slow-pace of progress over securing United Nations sanctions, says it remains committed to a diplomatic solution. It may by-pass the Russian and Chinese vetoes on the UN Security council and, instead, work with a "coalition of the willing" including both Britain and France, to turn the screw on Tehran.
In an interview with an Arabic TV station last week, Mr Bush dismissed fears of an imminent US attack on Iran as "empty propaganda". He said: "There's a lot of gossip in parts of the world that try to scare people about me personally or my country or what we stand for...It's baseless gossip."
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