TEHRAN (Reuters) - Iran is ready to fill a vacuum in Iraq caused by the collapsing power of the United States, its president said on Tuesday.

Iranian President Mahmoud Ahmadinejad speaks with journalists during a news conference in Tehran August 28, 2007. REUTERS/Caren Firouz

“The political power of the occupiers (of Iraq) is being destroyed rapidly and very soon we will be witnessing a great power vacuum in the region,” Mahmoud Ahmadinejad said.

“We, with the help of regional friends and the Iraqi nation, are ready to fill this void.” Saudi Arabia was one of the countries Iran was ready to work with, he said.

The U.S. military accuses the Islamic Republic of arming and training militias behind some of the violence in Iraq. Iran rejects the charge and blames the presence of U.S. forces, numbering about 162,000, for the violence.

In a two-hour news conference, Ahmadinejad also rejected reports Iran had slowed nuclear work, which the West fears is aimed at making atom bombs, and said it would respond if Washington branded its Revolutionary Guards a terrorist force.

Iran, which like Iraq is majority Shi’ite Muslim, has often called on fellow Gulf states to reach a regional security pact. But Gulf Arab states, most of which are predominantly Sunnis, are suspicious of Tehran’s intentions in Iraq and the region.

With Shi’ite Muslims now in power in Baghdad, ties have strengthened between Iran and Iraq since 2003, when U.S.-led forces toppled Iraq’s Sunni president, Saddam Hussein, who had waged an eight-year war against Iran in the 1980s.

The region did not need countries from “thousands of kilometres away” to provide security, Ahmadinejad said, and U.S. and other forces in Iraq and Afghanistan had run out of solutions.

“TRAPPED IN A SWAMP”

“They are trapped in the swamp of their own crimes,” Ahmadinejad said. “If you stay in Iraq for another 50 years nothing will improve, it will just worsen.”

President George W. Bush, in a speech in Reno, Nevada, said extremist forces would be emboldened if the United States were driven out, and Iran would be left to pursue a nuclear weapon and set off an arms race.

“We will confront this danger before it is too late,” Bush said, referring to attempts to isolate Iran and the imposition of economic sanctions.

“I have authorized our military commanders in Iraq to confront Tehran’s murderous activities.” A U.S. commander said on Sunday that Iraqi Shi’ite group have received more weapons, funding and training from Iran in the past two months.

U.S. and Iranian officials have held several rounds of talks on security in Iraq since May, the most high-profile meetings since Washington cut ties with Tehran after students took U.S. diplomats hostage following the 1979 revolution.

Washington is also leading efforts to isolate Iran over its nuclear programme, which it says is an attempt to build bombs under cover of a civilian programme. Tehran denies the charge and says it is seeking only nuclear-generated electricity.

The U.N. Security Council has imposed two sets of sanctions on Tehran since December. Diplomats say Iran’s sensitive atomic work seems to have slowed, either for fear of new steps or because of technical hitches.

But Ahmadinejad dismissed reports it was not making such fast nuclear progress. “These (reports) are not true,” he said.

“I want to officially announce to you that from our viewpoint the issue of Iran’s nuclear case has been closed. Today Iran is a nuclear Iran, meaning that it has the complete cycle for fuel production.”

U.S. officials said this month Washington might soon name the Revolutionary Guards a foreign terrorist group, a move that would enable the United States to target the force’s finances.

“It would be a joke I guess,” said Ahmadinejad, himself a former Guards commander.