Iran-US thaw aborts at Iraq conference

SHARM EL-SHEIKH, Egypt (AFP) - Iran and the United States dashed hopes of a major breakthrough at an international conference convened to stabilise war-torn Iraq when they held only mid-level talks on Friday.

But the two-day meeting ended after a marked improvement in Washington's strained relations with Iran's traditional ally Syria, signalling an apparent shift of US policy in the region.

The White House said on Friday it was "very satisfied" with the conference.

Speculation had mounted since Thursday's start of the conference in the Egyptian resort of Sharm el-Sheikh that US Secretary of State Condoleezza Rice could hold historic talks with her Iranian counterpart, Manouchehr Mottaki.

But at a meeting designed to enhance international cooperation on Iraqi security, Mottaki called US troops "terrorists," and lashed out at Washington over the continued detention of Iranian officials seized in January.

"To create a safe haven for those terrorists who try to turn Iraqi territory into a base for attacking Iraq's neighbours should be condemned," he said.

"Mr Mottaki was referring to countries which, like the United States, carry out acts of terrorism in Iraq," a member of the Iranian delegation at the conference told AFP.

"When the United States arrests five Iranian diplomats in Iraq, it is an act of terrorism," he said on condition of anonymity.

On January 11, US troops stormed an Iranian liaison office in Arbil, capital of the northern Iraqi Kurdistan region, and detained six employees, one of whom was later released.

The United States has said the men had links to Iran's elite Revolutionary Guards, and none of them held a diplomatic passport.

US Ambassador to Iraq Ryan Crocker said on Friday he met an Iranian deputy foreign minister, but played down its significance. "It was very limited, very short and it was on Iraq," he told reporters.

Rice said that a meeting at the same level had already taken place in March.

Iraqi Foreign Minister Hoshyar Zebari was more upbeat, however, calling the meeting a "positive sign."

Hopes of the highest-level direct talks between Iran and the United States since the foes severed ties in 1980 soured when Mottaki walked out of a dinner attended by Rice on Thursday.

Mottaki claimed he was offended by the revealing dress worn by a Russian violinist, said US officials, suggesting his discomfort may have had more to do with a table layout seating him directly opposite Rice.

The two officials had earlier exchanged polite conversation at a lunch, fuelling speculation of further talks.

In contrast, Rice held her administration's highest-level talks with Syria in two years on Thursday.

She met Syrian Foreign Minister Walid Muallem and urged him to stem what she called the flow of foreign fighters crossing into Iraq to join groups fighting US troops and the Shiite-led government.

"This is not a favour to the US, it is an opportunity to help stabilise Iraq and therefore serve the neighbourhood," she said after the meeting.

"It was an important conversation, I'm very glad we had the opportunity," Rice told a news conference on Friday before leaving for Washington.

White House spokeswoman Dana Perino said the US was "very satisfied" with the conference and had no regrets that the meeting did not yield top-level US-Iran talks.

"Overall for the meeting that took place in Sharm el-Sheikh, we're very satisfied, but there's follow-up to do," she told reporters, noting that US President George W. Bush was sending Vice President Dick Cheney to the region next week.

"If the opportunity would have presented itself to meet with the Iranians as well, I think that the secretary would have been pleased to talk with them. It didn't," Perino said.

The final statement on Friday's security meeting reaffirmed the desire of all participants to "combat terrorist activities and prevent the use of their territory for supplying, organising and launching terrorist operations."

At a news conference after the meetings Mottaki blamed the "failure of US policies" for wreaking havoc in Iraq.

"We believe the US should take a hard look to review policies in the region. The failure in Afghanistan, in Iraq... these things show failure of policies," he said.

"(The US) will see us on their side if they work for peace and stability in Iraq," Mottaki added.

The opening day of the conference won Iraq pledges of 30 billion dollars in debt relief and an internationally endorsed roadmap to achieve political and economic stability in five years.