Story highlights Iranian U.N. envoy: Iran "categorically rejects these fabricated and baseless allegations"

Counterterrorism official: U.S. agents questioned the suspect for 12 days

Holder says the alleged plan was directed by elements of the Iranian government

Saudi Embassy: "The attempted plot is a despicable violation of international norms"

U.S. agents disrupted an Iranian assassination-for-hire scheme targeting Saudi Arabia's ambassador to the United States, U.S. officials said Tuesday.

Elements of the Iranian government directed the alleged plan, U.S. Attorney General Eric Holder said.

A naturalized U.S. citizen holding Iranian and U.S. passports and a member of Iran's Revolutionary Guard face conspiracy charges connected with the plot.

"In addition to holding these individual conspirators accountable for their alleged role in this plot, the United States is committed to holding Iran accountable for its actions," Holder said.

A spokesman for Iranian President Mahmoud Ahmadinejad described the accusations as a "fabrication" by U.S. authorities attempting to distract American citizens.

"They want to take the public's mind off the serious domestic problems they're facing these days and scare them with fabricated problems outside the country," spokesman Ali Akbar Javanfekr said.

The Royal Embassy of Saudi Arabia in Washington thanked U.S. authorities for stepping in.

"The attempted plot is a despicable violation of international norms, standards and conventions and is not in accord with the principles of humanity," the embassy said in a written statement.

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The Saudi ambassador was not the only intended target, U.S. officials said. The suspects also discussed attacking Israeli and Saudi embassies in Washington and possibly Buenos Aires, Argentina, a senior U.S. official said.

It is unclear why the Saudi ambassador was targeted, the official said, or how widespread knowledge or approval of the plot was within Ahmadinejad's government.

U.S. Rep. Mike Rogers, chairman of the House Intelligence Committee, later said he was confident the plan was sanctioned by top Iranian officials.

"The quickness of the decisions that were made in order for certain elements of this to fall into place tells us that it is clearly tied to the highest levels of the Iranian government," he said.

Manssor Arbabsiar, a 56-year-old naturalized U.S. citizen, and Gholam Shakuri, an Iran-based member of Iran's Islamic Revolutionary Guard Corps, are accused of conspiracy to murder a foreign official, conspiracy to use a weapon of mass destruction and conspiracy to commit an act of terrorism, the FBI said.

Arbabsiar was arrested in September. Shakuri remains at large, the bureau said.

The two were in a group that began planning this spring to kill Saudi Ambassador Adel Al-Jubeir, it said.

Authorities developed the case against them with the help of an undercover informant posing as an associate of a Mexican drug cartel, according to officials and an FBI agent's affidavit released Tuesday.

Arbabsiar and the undercover informant allegedly discussed using explosives to kill the ambassador and possibly attacking a crowded restaurant, according to the affidavit.

The informant named $1.5 million as his price, it said. Arbabsiar allegedly sent $100,000 intended as a down payment, telling the informant his "cousin" had deep pockets, court documents said.

"This is politics, OK? ... It's not like, eh, personal," Arbabsiar told the informant in a secretly recorded meeting in Mexico on July 17, the affidavit alleges.

According to the affidavit, Arbabsiar said his cousin had "the government behind him. ... He's not paying from his pocket."

The alleged scheme involved the Quds Force, a branch of the Islamic Revolutionary Guard that is suspected of being involved in a number of foreign operations, court documents and U.S. officials said.

U.S. officials accuse the Quds Force of sponsoring attacks against U.S. and coalition forces in Iraq, the affidavit released Tuesday said. In October 2007, the Treasury Department designated it as "providing material to the Taliban and other terrorist organizations."

Mohammad Khazaee, Iran's permanent representative to the United Nations, said Tuesday night that he was "shocked to hear such a big lie," claiming the chain of events outlined by U.S. authorities was an "insult to the common sense" of people everywhere.

In a letter to United Nations Secretary-General Ban Ki-moon on Tuesday night, Khazaee decried the United States' "warmongering and propaganda machine against Iran," which he said threatened stability and peace in the Persian Gulf.

"The Islamic Republic of Iran strongly and categorically rejects these fabricated and baseless allegations, based on the suspicious claims by an individual," he wrote.

The alleged plot read "like the pages of a Hollywood script," but the implications were real, FBI Director Robert Mueller said.

"This case illustrates that we live in a world where borders and boundaries are increasingly irrelevant -- a world where individuals from one country sought to conspire with a drug-trafficking cartel in another country to assassinate a foreign official on United States soil," he said.

Cooperation with the Mexican government played a key role in the investigation, U.S. officials said.

U.S. authorities arranged with Mexican officials for Arbabsiar to be denied entry into Mexico, a senior counterterrorism official said.

From there, he was placed on an airplane to New York, where U.S. agents interrogated him for 12 days, obtained a confession and compiled dozens of intelligence reports, the official said.

Investigators have directly linked the plot to Iran's elite Quds Force but have not directly linked it with President Mahmoud Ahmadinejad, the senior counterterrorism official said.

But even as authorities worked to determine how widespread the Iranian government's involvement was, U.S. Secretary of State Hillary Clinton said Tuesday that additional actions to further isolate the Iranian regime would be considered.

Senior Obama administration officials emphasized that the United States would pursue non-military responses.

A U.S. official said Tuesday that the United States will be taking up the issue with the U.N. Security Council and other members of the international community, the official said.

Shortly after U.S. authorities released details of the accusations Tuesday, the U.S. Treasury Department announced sanctions targeting Arbabsiar, Shakuri and three others tied to the alleged plot.

Often considered regional rivals, the oil-rich Saudi kingdom has long been at odds with Iran.

The country's Sunni leaders have at times discussed directly intervening in Iraq following the U.S. military withdrawal, according to a Council on Foreign Relations report. Iran has largely supported Shiite militias in Iraq.

A spokesman for Iran's foreign ministry said Tuesday's U.S. allegations were baseless, noting that Iran's relations with Saudi Arabia are "based on mutual respect," the semi-official Mehr news agency reported.

"Making such false allegations will not get anywhere and will not influence public opinion," said spokesman Ramin Mehmanparast, according to Mehr.

But Saudi security forces are now concerned that Iran may try to stir unrest during the upcoming hajj pilgrimage season in Saudi Arabia, said a senior Saudi adviser not authorized to speak to the media.

"We are on our toes. We expect the worst and we think Iranians are capable of using any person from any country to stir trouble during hajj season," the Saudi adviser said.