Scores of Iraqis angered by the deadly arms dump explosion, held an anti-American demonstration on Saturday near the Palestine Hotel were stay most of foreign journalists and American officials, both military and civilian in charge of Iraq.

U.S. troops around the Hotel did not intervene.

"A vocal minority claiming to transform Iraq into Iran will not be permitted to do so", Rumsfeld said, after President Bush indicated that the United States has sent words to Tehran that it expects Tehran to allow Iraq to develop into a peaceful and stable society.

"We will not allow the Iraqi people’s democratic transition to be hijacked by those who might wish to install another form of dictatorship", Rumsfeld added in his warning. "There is no question that the government of Iran has encouraged people to go into Iraq and that they have people in the country attempting to influence the country," Rumsfeld said.

Although Iranian officials say they want "democracy" for the Iraqis, but at the same time they don’t hide their desire to see their model of government also installed in neighbouring Baghdad.

"What we want for our Iraqi brothers is freedom, justice and democracy on the basis of one Iraqi one vote", Iranian President Mohammad Khatami said on Thursday receiving the French Foreign Affairs Minister Dominique de Villepin.

"Deciphering the statement, it means we want a Shi’a-controlled Islamic republic for Iraq", observed an Iranian political analyst, pointing to the fact that based on the numeric majority of the Shi’a Muslims in Iraq, they should win in any free election.

In an interview with NBC television to be broadcast Friday, the president said there are no military plans against Iran, but said Washington will work with the rest of the world to encourage Iranian cooperation.

"Iraqis clearly and loudly say yes to Islam, no to America or Saddam. They want an Islamic state and this is their most natural right to chose the regime they want", said Ayatollah Mohammad Yazdi, an influential Iranian cleric on Friday.

Hojjatoleslam Abdolaziz Al-Hakim, the younger brother of Ayatollah Mohammad Baqer al-Hakim, the leader of the Tehran-based, Iran-backed Supreme Assembly of the Islamic Revolution of Iraq (SAIRI) told followers in Baghdad yesterday that Shi’ites would not accept a government imposed by US forces.

"We will not take part in any government that is imposed on us", the cleric, who is also the "commander" of the "Badr Brigade", the military wing of the SAIRI, told several hundred of worshippers during the Friday prayer in Baghdad.

The younger Hakim, who returned to his homeland ten days ago, after 23 years of exile in Iran, is reported to be actively paving the ground for a "huge, Khomeini-like" welcome by the Iraqis for his brother, the leader of SAIRI.

"Let’s say no to America, no to the occupation. We won’t replace one tyrant with another", echoed from a nearby Sunni mosque Sheikh Mo’ayyad Ibrahim Al-Aadhami, also speaking during the same ceremonies, confirming calls by Iranian clerical rulers to the Iraqi Muslims to "keep unity and be aware of the enemy’s plots of divide and rule the Muslims".

American warning to Iran and by proxy, to the Tehran-backed Iraqi Shi’a, which Washington want to sideline them in the process of government-building and the response they get from both Shi’a and Sunni leaders has evidently created a rift between the Coalition.

"There are other countries around the Islamic world which call themselves Islamic states - there's one next door which is called Iran, there are many others", the foreign secretary said during an interactive phone-in programme recorded for World Service's Talking Point to be broadcast on Sunday.

"My question her is what's so frightening about a state which is Islamic", he was quoted by the official Iranian news agency IRNA as having said.

Straw further referred to the example of Iran, -- which President Bush has declared as an "Evil State" -- as an "emerging democracy" with an overwhelming majority of Shi’a Muslims.

"One of the things we have to encourage across the world is the intersection between people's religions and people's concepts of democracy", Straw said.

Several Iraqi opponents of the toppled Saddam Hoseyn regime expressed concern about Americans efforts to sideline the SAIRI, so far the best organised and largest of all Iraqi Shi’a groups.

A member of the six-organisations formed two months ago in the Kurdish city of Salaheddin to administer the war-ravaged country in the first months after the fall of the former dictator, SAIRI refused to take part in the first meeting of the Iraqi opponents sponsored by the US and said it would do so in the next meeting to be held in Baghdad on Monday, supervised by General Jay Garner, the present ruler of Iraq.