TEHRAN,(Reuters) – Iran rejected on Wednesday accusations by U.S. President George W. Bush that Tehran was fomenting instability in Iraq, and called on Washington to change its policies in the region. “They (the U.S. accusations) are not true,” Iranian Foreign Ministry spokesman Mohammad Ali Hosseini told Reuters by phone, saying Bush was repeating them “again and again”. The spokesman did not comment on Bush’s remarks that Iran’s pursuit of the atomic bomb could lead to a nuclear holocaust in the Middle East.

Bush and other U.S. officials have long accused Iran of supplying weapons to insurgents in Iraq, but in a speech to veterans on Tuesday the president hardened his stance by lumping Tehran and al Qaeda together. “Iran has long been a source of trouble in the region. It is the world’s leading state sponsor of terrorism… And Iran’s active pursuit of technology that could lead to nuclear weapons threatens to put a region already known for instability and violence under the shadow of a nuclear holocaust,” Bush said. He said U.S. forces in Iraq have recently seized rockets manufactured in Iran and that attacks on American bases and troops with Iran-supplied weapons had increased in the past few months. “Iran’s actions threaten the security of nations everywhere. And that is why the United States is rallying friends and allies around the world to isolate the regime, to impose economic sanctions. We will confront this danger before it is too late. “The Iranian regime must halt these actions. And until it does, I will take actions necessary to protect our troops. I have authorized our military commanders in Iraq to confront Tehran’s murderous activities,” Bush added.

Bush’s verbal attack on Iran came just hours after Iranian President Mahmoud Ahmadinejad said the power of the United States was rapidly collapsing in Iraq and that Tehran was ready to step in to help fill the vacuum.

Iran blames the U.S.-led invasion of Iraq in 2003 for the violence that is threatening to tear the country apart and has repeatedly called on U.S. forces, now numbering about 160,000, to leave the neighbouring country.

Hosseini said the U.S. path was neither “useful or fruitful”, adding: “It is better for him (Bush) to change his point of view and political decisions.”

The two countries, which have not had diplomatic ties since shortly after Iran’s 1979 Islamic revolution, are also embroiled in a standoff over Tehran’s nuclear programme, which the West fears is aimed at making atom bombs. Tehran denies the charge.

In Tuesday’s speech, Bush warned that extremist forces would be emboldened if the United States were driven out of the region, leaving Iran to pursue a nuclear weapon and set off an arms race. “Iran could conclude that we were weak and could not stop them from gaining nuclear weapons,” Bush said.

With 164,000 U.S. troops in Iraq and patience growing thin in the Democratic-controlled U.S. Congress and the American public, Bush has been defending his Iraq war strategy.

A report by the U.S. commander on the ground in Iraq, Gen. David Petraeus, and the U.S. ambassador to Iraq, Ryan Crocker, due to be sent to Congress by Sept. 15, could trigger a change in Iraq policy.