The Iranian ambassador to Baghdad has revealed a plan to expand significantly Tehran's economic and military ties with Iraq, the New York Times reported on Sunday.

In an interview with the Times, Hassan Kazemi Qumi outlined a plan that could potentially heighten Iran's conflict with the United States over Iraq. Washington has recently warned Tehran not to meddle in the affairs of its neighbor, detaining a number of Iranian operatives in recent weeks and claiming it has proof of Iranian complicity in attacks on American and Iraqi forces.

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The Iranian ambassador said Iran was prepared to offer Iraq forces training, equipment and advisers for what he called "the security fight," the Times said.

In the economic area, Qumi told the paper that Iran was prepared to take on expanded responsibility for the reconstruction of Iraq.

"We have experience of reconstruction after war," Qumi said, referring to the Iran-Iraq war in the 1980s. "We are ready to transfer this experience in terms of reconstruction to the Iraqis."

Qumi also acknowledged, for the first time, that two Iranians seized and later released by U.S. forces last month were security officials, as the Americans had claimed. But he said that they were engaged in legitimate discussions with the Iraqi government and should not have been detained.

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

Qumi said also that Iran would soon open a national bank in Iraq, in effect creating a new Iranian financial institution right under the Americans' noses. A senior Iraqi banking official, Hussein al-Uzri, confirmed that Iran had received a license to open the new bank, which Uzri said would apparently be the first "wholly owned subsidiary bank" of a foreign country in Iraq.

"This will enhance trade between the two countries," Uzri said.