US ambassador to Iraq Ryan Crocker said he met Iranian ambassador Hassan Kazemi for four hours in Baghdad in the first such high-level encounter since the countries severed diplomatic relations in 1980.

Crocker said he had insisted that Iran must back up its claimed support for Prime Minister Nuri al-Maliki's beleaguered government by cutting off support for armed factions fighting in Iraq.

"The purpose of our efforts in this meeting was not to build a legal case -- presumably the Iranians know what they were doing -- our point was simply to say we know as well, this is dangerous for Iraq," he said.

"What we underscored to the Iranians was that beyond principle there is practice," he said. "The Iranian actions on the ground have to come into harmony with their principles."

He said the Iranians proposed the creation of a trilateral security commission involving Iraqis and US representatives -- a suggestion Crocker dismissed.

"What we are doing today effectively was a security committee because on the level of policy there isn't a great deal to argue about."

Crocker said the Iranians did not address US complaints and had only complained in general terms about the occupation of Iraq by US troops and said there had not been enough US effort to train up Iraqi security forces.

There had been little expectation that the envoys would see eye-to-eye over the Iraq crisis, with Iran's foreign ministry on the eve of the talks accusing US agents of sponsoring subversives in its border provinces.

Washington has dismissed similar accusations in the past, but they serve to underline the chill that still grips Iranian-American relations a quarter of a century after US embassy diplomats were held hostage for 444 days.

"There are important points of agreement between the two parties and the Iraqi government that we are seeking to develop," Iraqi government spokesman Ali al-Dabbagh said before the talks ended.

Washington accuses Iran's Revolutionary Guards of supplying armed groups with armour-piercing roadside bombs that have been blamed for the deaths of hundreds of the 3,455 American troops killed in the conflict.

US forces are holding seven alleged Revolutionary Guards agents detained in Iraq on suspicion of subversion, while Tehran furiously insists that they are diplomats. Crocker said this topic did not come up.

Shia-dominated Iran says the US-led occupation force is the cause of the problems and that it is also allowing anti-Iranian rebels to use Iraq as a base.

Both countries are also at loggerheads over Iran's nuclear drive but the issue was ruled off the agenda in Monday's talks.

"If the other side has a genuine political will and accepts to reality on the ground and revises its previous policies on Iraq, these discussions could prove successful," Iranian Foreign Minister Manouchehr Mottaki had said before the talks.

"The discussions aim to look at questions about Iraq and correcting US policies," he said, adding that there was a "huge file of differences" which would not be up for discussion.

Maliki, who hosted the talks, emphasised that Iraq did not want to be an arena for foreign powers to work out their differences through violence.

"Iraq will not be a springboard for threats against any of the neighbouring countries," he vowed. "In return we look for a similar stance from the other states, especially our neighbours."

Monday's meeting followed a brief encounter between US Secretary of State Condoleezza Rice and Mottaki on May 4 at a conference on Iraq in the Egyptian resort of Sharm El-Sheikh.

"America is the Great Satan as the late Imam Khomeini said," influential Iranian MP Ahmad Tavakoli said last week. "However, one can also talk with the devil if it is beneficial and if the circumstances arise."

But Anthony Cordesman of US think-tank the Centre for Strategic and International Studies noted that "Iran's position... has been hostile beyond the usual standards of pre-conference posturing and leverage."

In fresh Iraqi violence, a truck bomb exploded outside one of Baghdad's most revered shrines yesterday, killing at least 20 people and damaging the outer walls of the Abdel Qadir Gilani Mosque.

The powerful blast sent a column of dust and black smoke into the sky above the Sinak district and unleashed yet another scene of devastation in the Iraqi capital.

"I came into the street after the explosion near the mosque, and I found five charred bodies myself, including a pregnant woman," said witness Saed Mohammed, as fire engines arrived to battle the flames.

Security sources said 20 people had been killed and 30 wounded. Vehicles caught fire up and down the street and the mosque was damaged, with the base of a minaret partly destroyed.

Abdel Qadir Gilani founded the Qadiri order of Sufi Islam. He was buried in the Baghdad shrine in the year 561 of the Islamic calendar, that is 1166 of the common era.

The imam of the mosque, Mohammed Al-Issawi, blamed terrorists. "We feel sorry for myself and for all Iraqis. We must be patient in order not to give a opportunity to our enemies," he told state television.

Baghdad is in the grip of a vicious bombing campaign by insurgent gangs bent on fomenting sectarian violence in a bid to fatally undermine a 14-week-old security operation by US and Iraqi forces.

A battle raged yesterday in central Baghdad after insurgents hijacked two buses and kidnapped at least 15 passengers, police said.

At least three policemen had been killed and eight wounded, including four passersby, authorities said.

The small buses where travelling through the Fadhil neighbourhood, a Sunni enclave in central Baghdad, when they were waylaid by unidentified gunmen in three cars at 10:15 am.

The insurgents then abducted at least 15 passengers and took them to a nearby abandoned government building, a police officer said on condition of anonymity because he was not authorised to talk to reporters.

The buses were heading from Baghdad's central Bab al-Mudham bus station to the city's eastern Shia neighbourhoods.

The fighting began when Iraqi security forces reached the scene about 30 minutes later, police said.

Nine militants were arrested as they attacked security forces from nearby alleys with light weapons.

According to Iraqi police, at least two US helicopters were hovering overhead and US forces had taken up positions near the fighting, but were not directly involved.