US issues fresh warning to Iran

But Defence Secretary Donald Rumsfeld, in a New York speech, reiterated current policy of avoiding contact with "the top two layers" of Iranian government. Low-level contacts have been held over issues including Iraq and Afghanistan.

Rumsfeld cited the speed of the 1979 Islamic revolution and said, "maybe we'll be favourably surprised some day" by a more democratic government.

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BBC reports that senior US officials issued warnings to Iran not to interfere in the reconstruction of Iraq. Donald Rumsfeld was one of those with strong words for Tehran, warning that any attempt by Iran to build an Islamic republic in its neighbour Iraq would be quashed.

"Iran should be on notice; efforts to try to remake Iraq in Iran's image will be aggressively put down," Mr Rumsfeld said. In the same speech, Mr Rumsfeld acknowledged that Iraq may have destroyed all its chemical munitions and weapons of mass destruction before the US-led invasion last March.

He said this may explain why such weapons were not used against coalition forces during the recent conflict.

Reuters furthur adds that Iran told Washington to stay out of its internal affairs.

US officials said intelligence suggests senior al Qaeda members hiding in Iran had prior knowledge of the May 12 suicide bombings in Saudi Arabia that killed 34 people, including eight Americans.

White House spokesman Ari Fleischer said the arrests of several suspected al Qaeda members announced by Iran Monday did not quell concerns that group leaders were in the country.

"The steps that the Iranians claim to have taken in terms of capturing al Qaeda are insufficient," Fleischer said. "There's... a concern about whether or not the top-level al Qaeda that are in Iran are being arrested."

Iran's foreign ministry said it did not know whether senior al Qaeda members were arrested.

Fleischer said Iran has also failed to satisfy US concerns it is developing nuclear weapons, which Iran denies.

Iran hopes the United States will refrain from "any interference in our affairs," Foreign Ministry spokesman Hamid Reza Asefi said. Iran would defend its interests "with full power."