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WASHINGTON - Iran is taking steps to greatly expand military and economic ties with Iraq, Tehran's ambassador to Iraq said in an interview on Sunday with New York Times.

Iran's ambassador to Iraq, Hassan Kazemi Qomi, seen during a news conference at the Iranian embassy in Baghdad in this January 18, 2007 file photo. Iran's ambassador to Iraq, Hassan Kazemi Qomi, seen during a news conference at the Iranian embassy in Baghdad in this January 18, 2007 file photo. [Reuters]

The ambassador, Hassan Kazemi Qomi, said Iran was prepared to offer Iraqi forces training, equipment and advisers for "the security fight" and was ready to assume major responsibility for the reconstruction of Iraq.

He also acknowledged for the first time that two Iranians detained last month by US forces were security officials as the United States has claimed.

"They worked in the security sector in the Islamic Republic, that's clear," Qomi said in a 90-minute interview at the Iranian Embassy in Baghdad. The interview appeared in Monday's New York Times.

The Iranians were in Iraq because "the two countries agreed to solve the security problems," the ambassador said. The Iranians "went to meet with the Iraqi side," he told the newspaper.

Qomi said the Iranians should not have been detained and he ridiculed evidence the US military said it has which proving the Iranians were involved in planning attacks on American and Iraqi forces.

Qomi also announced that Iran would soon open a national bank in Baghdad. An Iraqi banking official confirmed that Iran has received a license to open what would be the first "wholly owned subsidiary bank" of a foreign country in Iraq, the newspaper reported.

US forces this month detained five more Iranians in a raid on a diplomatic office in the northern city of Arbil.

The United States has accused Iran of helping arm, train and fund Iraqi militants, notably fellow Shi'ite Muslims.

President George W. Bush said on Friday US forces in Iraq have authority to protect themselves against Iranians attempting to launch attacks inside Iraq.

State Department spokesman Sean McCormack told The New York Times that the United States had a significant body of evidence tying Iran to sectarian attacks inside Iraq.

"There is a high degree of confidence in the information that we already have, and we are constantly accumulating more," McCormack said.

The report said McCormack did not address the specifics of Qomi's comments about plans for stronger economic and security ties, but said Iran currently plays "a negative role in many respects" in Iraq.