BAGHDAD (NY Times) -- Iran's ambassador to Baghdad outlined an ambitious plan Sunday to greatly expand its economic and military ties with Iraq - including an Iranian national bank branch in the heart of the capital.

The ambassador, Hassan Kazemi Qomi, said Iran was prepared to offer Iraqi forces training, equipment and advisers for the "security fight." In the economic area, Qomi said, Iran was ready to assume major responsibility for the reconstruction of Iraq, an area of notable failure on the part of the U.S. since American-led forces overthrew Saddam Hussein nearly four years ago.

Qomi also said that two Iranians seized and later released by American forces last month in Baghdad were security officials. But he said they were engaged in legitimate discussions with the Iraqi government and should not have been detained.

Qomi's remarks, in an interview at the Iranian Embassy here, amounted to the most substantive response Iranians have made yet to increasingly belligerent accusations by the Bush administration that Iran is acting against U.S. interests in Iraq.

This month, American forces detained five more Iranians in a raid on a diplomatic office in Irbil.