WASHINGTON (CNN) -- The Bush administration has launched a "significant escalation" of covert operations in Iran, sending U.S. commandos to spy on the country's nuclear facilities and undermine the Islamic republic's government, journalist Seymour Hersh said Sunday.

An Iranian flag flies outside the building containing the reactor of Bushehr nuclear power plant, south of Tehran.

White House, CIA and State Department officials declined comment on Hersh's report, which appears in this week's issue of The New Yorker.

Hersh told CNN's "Late Edition with Wolf Blitzer" that Congress has authorized up to $400 million to fund the secret campaign, which involves U.S. special operations troops and Iranian dissidents.

President Bush and Vice President Dick Cheney have rejected findings from U.S. intelligence agencies that Iran has halted a clandestine effort to build a nuclear bomb and "do not want to leave Iran in place with a nuclear program," Hersh said.

"They believe that their mission is to make sure that before they get out of office next year, either Iran is attacked or it stops its weapons program," Hersh said.

The new article, "Preparing the Battlefield," is the latest in a series of articles accusing the Bush administration of preparing for war with Iran.

He based the report on accounts from current and former military, intelligence, and congressional sources. Watch Hersh discuss what he says are the administration's plans for Iran »

"As usual with his quarterly pieces, we'll decline to comment," White House spokesman Gordon Johndroe told CNN.

"The CIA, as a rule, does not comment on allegations regarding covert operations," CIA spokesman Paul Gimigliano said.

Ryan Crocker, the U.S. ambassador in Baghdad, denied U.S. raids were being launched from Iraq, where American commanders believe Iran is stoking sectarian warfare and fomenting attacks on U.S. troops.

"I can tell you flatly that U.S. forces are not operating across the Iraqi border into Iran, in the south or anywhere else," Crocker said.

Hersh said U.S. efforts were staged from Afghanistan, which also shares a border with Iran.

He said the program resulted in "a dramatic increase in kinetic events and chaos" inside Iran, including attacks by Kurdish separatists in the country's north and a May attack on a mosque in Shiraz that killed 13 people.

The United States has said it is trying to isolate Iran diplomatically in order to get it to come clean about its nuclear ambitions. But Bush has said "all options" are open in dealing with the issue.

Iran insists its nuclear program is aimed at providing civilian electric power, and refuses to comply with U.N. Security Council demands that it halt uranium enrichment work.

U.N. nuclear inspectors say Tehran held back critical information that could determine whether it is trying to make nuclear weapons.

Israel, which is believed to have its own nuclear arsenal, conducted a military exercise in the eastern Mediterranean in early June involving dozens of warplanes and aerial tankers.

The distance involved in the exercise was roughly the same as would be involved in a possible strike on the Iranian nuclear fuel plant at Natanz, Iran, a U.S. military official said.

In 1981, Israeli warplanes destroyed an Iraqi nuclear reactor.

Iran's parliament speaker, Ali Larijani, warned other countries against moves that would "cost them heavily." In comments that appeared in the semi-official Mehr news agency Sunday, an Iranian general said his troops were digging more than 320,000 graves to bury troops from any invading force with "the respect they deserve."

"Under the law of war and armed conflict, necessary preparations must be made for the burial of soldiers of aggressor nations," said Maj. Gen. Mirfaisal Baqerzadeh, an Iranian officer in charge of identifying soldiers missing in action.

Journalist Shirzad Bozorghmehr in Tehran, Iran, contributed to this report.

All About Iran • George W. Bush • Israel • United Nations Security Council