MINSK (Reuters) - Belarus said on Tuesday it had uncovered a spy ring working for Washington, deepening a diplomatic and human rights row between the countries.

Police scuffle with protesters during an opposition rally in central Minsk March 25, 2008. REUTERS/Vasily Fedosenko

Hundreds of demonstrators from the ex-Soviet state’s liberal and nationalist opposition, meanwhile, staged an unauthorized rally in the centre of Minsk and clashed with police. Eyewitnesses said dozens were detained.

The U.S. ambassador this month left Belarus, whose president, Alexander Lukashenko, is accused by the West of violating basic rights. Authorities objecting to what they saw as new sanctions against Belarus had urged her to go.

The U.S. embassy has since stopped issuing visas and complied with a request to cut diplomatic staff in Minsk.

On Tuesday, Belarus’s intelligence service, still known by its Soviet-era initials KGB, said a spy ring of Belarussian citizens had been uncovered in the country of 10 million.

“The information about this group being exposed is completely true,” a KGB official said. “A group conducting espionage for the United States has been uncovered.”

KGB chairman Yuri Zhadobin later told Belarussian media that no arrests had been made in what he said was a “preventive” operation. New checks would determine if laws had been broken.

Tightly controlled state television reported at the weekend that a spying network of 10 Belarussian nationals had been exposed, but gave no details of concrete charges against them.

“We have no spies working on the territory of Belarus. These are people working for the diplomatic security service,” U.S. charge d’affaires Jonathan Moore told local media.

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The report showed people described as embassy employees working as informers for the U.S. Federal Bureau of Investigation. Some told an interviewer they were gathering information to prevent terrorism.

OPPOSITION RALLY

In the evening, several hundred opposition activists gathered in a Minsk square to mark the 90th anniversary of the creation of the Belarussian People’s Republic, crushed within months by Bolshevik forces.

No authorization had been granted for a city-centre rally.

Riot police surrounded the anti-Lukashenko protesters and broke them up into smaller groups. Clashes broke out and dozens were seen being led away to a police bus.

The opposition, often hit by internal divisions, has rarely attracted large crowds during protests in recent months.

Both the United States and European Union have long accused Belarus of crushing freedom of press and assembly.

Both bar entry to Lukashenko on grounds he rigged his 2006 re-election. U.S. officials, more critical, have denounced Belarus as “the last dictatorship in Europe”.

Lukashenko, at odds with traditional ally Russia over energy prices, seeks better ties with the West, particularly the EU. Several detainees deemed political prisoners have been freed.

Washington last year prohibited dealings with national oil products firm Belneftekhim, but denies Belarussian allegations that it has since imposed new punitive measures.

The Foreign Ministry called for sanctions to be lifted.

“If the U.S. side truly regrets what has happened and truly wants new and different relations with our country, it must rescind sanctions against Belarus,” a ministry statement said.

U.S. ambassador Karen Stewart last week said Belarus could end the logjam by freeing Alexander Kozulin, who ran against Lukashenko in 2006 and was sentenced to 5-1/2 years for staging protests after his landslide re-election.

Lukashenko remains broadly popular and says social benefits have spared Belarussians the turmoil of other ex-Soviet states.