The Iranian embassy in Baghdad says US troops have freed seven Iranians hours after detaining them at a hotel in the Iraqi capital.

Iran rejected on Wednesday accusations by US President George W. Bush that Tehran was fomenting instability in Iraq, and called on Washington to change its policies in the region.

Iranian President Mahmoud Ahmadinejad declared Tuesday that US political influence in Iraq is “collapsing rapidly” and that Iran is ready to help fill any power vacuum.