Talks Between Us and Iran on Iraq War Marred By Claims of Spy Ring

Hopes for a breakthrough in US-Iran talks on Iraq diminished last night after Tehran formally complained about alleged US and British spy rings operating in Iran.

The two adversaries are due to hold a rare face-to-face meeting in Baghdad today to discuss the future of Iraq. But the utility of talks was in question last night after a top Iranian foreign ministry official summoned the Swiss ambassador in Tehran, who represents US interests, to launch a formal protest about what he called "espionage networks".

The official, Ahmad Sobhani, demanded an explanation for groups that he said were committing "infiltration and sabotage in western, central and south-western areas of the country", according to Iranian state television.

Iran has repeatedly complained of US and British attempts to stir up its ethnic minorities as a way of putting pressure on the leadership. The Americans have repeated accusations that Iran is sending explosives and other material to insurgents in Iraq.

The US military, in a statement, said US and Iraqi forces yesterday arrested a suspect in Baghdad's main Shia enclave, Sadr City, alleged to be involved in smuggling from Iran improvised explosives devices capable of penetrating armored vehicles. The US military claimed an insurgent cell in Sadr City had also been sending insurgents to Iran for training.

The US ambassador to Iraq, Ryan Crocker, is due to meet his Iranian counterpart, Hassan Kazemi, in Baghdad today to discuss the security situation in Iraq, which has shown few signs of improvement despite a sharp increase in US troop numbers this year.

Another eight US troops were killed at the weekend, bringing the toll to 102 for May, and putting it on course to be the deadliest month for US forces since the assault on Falluja in 2004.

In another development, General William Caldwell, the main US military spokesman in Baghdad, said US forces had released 42 Iraqis held in what was described as an al-Qaida hideout in Diyala province, north of Baghdad. Some were said to have been held for four months and there were signs those freed had been tortured.

The US-Iran talks are also supposed to include discussion of a timetable for US withdrawal and the presence of the Iranian rebel group Mujahedin-e-Khalq in Iraq. But they are not supposed to drift into areas such as Iran's alleged nuclear weapons ambitions. US and Iranian diplomats met briefly in March at an international conference in Iraq. But a possible meeting earlier this month between the US secretary of state, Condoleezza Rice, and the Iranian foreign minister, Manouchehr Mottaki, failed to materialize.

Ms Rice and the US defense secretary, Robert Gates, have been pressing for dialog with the Iranians. President George Bush had been reluctant to agree and the vice-president, Dick Cheney, is opposed.