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The death toll has climbed to seven and the Iranians want answers - or, as some contend, scapegoats. A few weeks ago, two bombs hidden in trash cans exploded in a market in Ahvaz, the capital of the oil-rich province of Khuzestan, causing over 100 casualties. It was the second time in recent months the city had been hit.
No group claimed responsibility for the Ramadan terrorist attack, but less than two hours after the bombings, Iran's official media were already pointing fingers. The Islamic Republic claimed that, once again, Arab separatists backed by British intelligence agents in nearby southern Iraq were wreaking havoc (see box).
If true, this would make Britain a state sponsor of terrorism.
But Mark Allworthy, an analyst at London's International Institute for Strategic Studies (IISS), says Iran will not be running to the United Nations anytime soon: "Nothing will come of this. It is merely political rhetoric meant for Iranians."
Still, the mere airing of such a charge underscores the tension between London and Teheran over Shi'ite militias in southern Iraq and Iran's advancing nuclear program.
Winning friends and influencing militias
Three days before the second Ahvaz bombing, Tony Blair leveled accusations of his own. The British prime minister claimed that Iran or its client Lebanese militia Hizbullah had provided the infrared triggers for the roadside bombs which killed eight British soldiers in southern Iraq.
However, not everyone was impressed with the evidence. The charges were "weak and clumsily constructed, to the point of being silly," wrote Mahan Abedin, editor of the Jamestown Foundation's Terrorism Monitor.
The Iranians hardly hold a monopoly on the bomb technology in question, said Abedin. Backing up this argument, The Independent quoted a former British agent who said the Irish Republican Army may have passed the triggers on to Iraq years ago by way of the Palestinians.
Whatever the case, Allworthy says Teheran was being put on notice that "the UK has stepped up border surveillance."
Iran has been flexing its muscles too: In June 2004, naval units from Islamic Revolutionary Guard Corps temporarily seized three British ships on the Arvand River, which leads to the Persian Gulf. Indeed, it does not seem likely that Iran will be easily intimidated.
"Iran has a fundamental national interest in Iraq," says George Friedman, CEO of the private, Austin-based intelligence company Stratfor. "It fought a terrible war with Iraq, and it needs to secure its Western flank."
Waged throughout most of the 1980s, the Iran-Iraq war cost the Islamic Republic a colossal 1.5 million casualties and $350 billion in damages. Now, with the fall of Saddam Hussein, Iran finally has the opportunity to neutralize its old Arab rival to the west. The name of the game is chaos, and Iran plays it by backing an ever-changing array of Shi'ite Islamist factions.
"The Iranians play a very complex game of balancing interests within the Shi'ite community," says Friedman. "So at one moment they will talk with Ayatollah Ali al-Sistani and another moment with Muqtada al-Sadr."
Michael Rubin, a resident scholar at the American Enterprise Institute and a former political adviser to the now-defunct Coalition Provisional Authority, had been in Iraq for nearly 18 months. He says the signs of Iranian penetration are all there: Hizbullah flags fly at the Basra headquarters of one major Shi'ite political party; Iran's envoy to Iraq comes from the Revolutionary Guards, not the Foreign Ministry; and Italian intelligence reports of Iranian agents moving into southern Iraq.
The rot has set in at the government level, too: The Washington Post reported in August that American freelance journalist Steven Vincent was murdered in Basra after outing radical Shi'ite groups which had formed death squads within the local police department.
All this means big headaches for the British, who have an interest in maintaining order.
Britain and Iran have also been clashing over the latter's suspected nuclear weapons program. On October 21, Reuters reported that industry sources accused the Islamic Republic of blocking British, as well as South Korean, imports in retaliation for an unfavorable vote at the International Atomic Energy Agency (IAEA) in September.
The Iranians, it seems, are none too happy about being reported to the United Nations Security Council for violations of the 1968 Non-Proliferation Treaty. Another wire report noted that some 300 protesters gathered outside the British Embassy in Teheran burning British and American flags, throwing stones and chanting "Nuclear energy is our legitimate right."
The international row began in August 2002, when an Iranian opposition group first revealed that the Islamic Republic had secretly constructed a uranium enrichment facility at Natanz and a heavy-water reactor at Arak. Caught red-handed, Iran halted enrichment and allowed IAEA inspections of its facilities while three European Union countries - Britain, France and Germany - sought a diplomatic solution.
Iran has claimed all along that its nuclear program at Natanz is just for generating electricity. However, critics say the argument makes little economic sense as the country's natural gas and oil reserves can supply it with all the energy it needs. As for the Arak reactor, it seems awfully large for producing medical isotopes for cancer treatment - but just the right size for making nuclear bombs.
Then there is the Shihab-3, a ballistic missile which can carry a nuclear warhead, and the fact that in 2004, IAEA inspectors found traces of high-enriched uranium - used for making atomic weapons - at Natanz. Finally, speaking before the US House Armed Services Committee in September, Iran expert Ken Pollack asked why a civilian establishment would have links with the Iranian military and rogue Pakistani nuclear scientist A.Q. Khan.
"It's basically a knock-off of the Pakistani nuclear weapons program," John Pike, director for GlobalSecurity.org, says of Iran's nuclear complex. "It's as if they said, 'Hi, I'd like one of each.'"
So what would the mullahs do with nukes? The fear is that a nuclear-armed Iran, puffed up with a feeling of invulnerability, will return to its pre-1996 revolutionary fervor and military adventurism, but few believe that Iran would actually attack the Jewish State with atomic weapons. Then again, Iranian President Mahmoud Ahmadinejad's recent statement that "Israel must be wiped off the map" hasn't reassured anyone.
For his part, Blair lashed out at the Iranians at an informal summit of EU leaders at Hampton Court Palace.
"This is unacceptable, and their attitude towards Israel, their attitude towards terrorism, their attitude on the nuclear weapons issue isn't acceptable," AFX Limited News quoted Blair as saying. "If they continue down this path, then people are going to believe that they are a real threat to our world's security and stability."
The battle lines are being drawn.