SOURCE: NEWS AGENCIES
"The ministry regrets the American decision to pull its staff out of Basra," Iraq's foreign ministry said in a statement on Saturday.
The US on Friday announced the closure of its consulate in Basra and said it is relocating diplomatic personnel assigned there alleging increasing threats from Iran and Iran-backed armed groups.
Blaming Iran for "indirect fire", Secretary of State Mike Pompeo said consular duties will be taken over by the embassy in Baghdad, while his office issued an advisory urging Americans not to travel to Iraq.
The decision further escalated the tension between the US and Iran, which is the target of increasing economic sanctions by the Trump administration.
Iran rejected what it called the US "propaganda and false accusations", insisting it condemned any attacks on diplomatic sites.
"Iran sees the absurd US justification which follow weeks of propaganda and false accusations against Iran and Iraqi forces as playing a blame-game," said the country's foreign ministry spokesman Bahram Ghasemi.
He said Tehran condemns any aggression against diplomats and diplomatic sites, and charged that the US move was a pretext for promoting "insecurity in Iraq" and to "pressure the country's government".
US sanctions on Iran
In May, Trump withdrew the US from an international deal to put curbs on Iran's nuclear programme in exchange for easing sanctions.
France, Britain, Germany, China and Russia have stayed in the pact, vowing to save it despite the restoration of US sanctions. The rial has lost 40 percent of its value against the US dollar since April.
Iran has blamed US sanctions for the currency's fall, saying the measures amount to a "political, psychological and economic" war on Tehran.
Iran has also accused the US and Israel of involvement in a deadly attack at a military parade in southwestern Iran this month.
Basra has been at the centre of protests that broke out in July before spreading to other parts of the country, as demonstrators railed against poor services and corruption among government officials.
Protesters set fire to several government buildings as well as headquarters of political parties and groups backed by Iran, which saw its consulate in Basra burned to the ground.
In a rare attack in Baghdad early September, three mortar rounds were fired into the Green Zone, a heavily fortified area which is home to the Iraqi parliament, government offices and the US embassy.
Iran is the only other major outside power present in Iraq, alongside bitter foe the US, which had led the 2003 invasion that toppled the then president Saddam Hussein.