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In October, as part of its ongoing effort to isolate and sanction Iran, the Bush Administration announced sanctions against several Iranian banks, companies and individuals linked to the Iranian Revolutionary Guard Corps (IRGC) and its special operations unit, the Quds (Jerusalem) Force, for their "support for terrorism." The White House launched a worldwide effort to persuade other countries not to do business with the designees, including Iran's Bank Melli. "Bank Melli provides banking services to the IRGC and the Qods Force," said the Treasury Department. "Entities owned or controlled by the IRGC or the Qods Force use Bank Melli for a variety of financial services."
Buried deep in the State and Treasury Department documents compiled in support of the sanctions -- unnoticed by the media -- is the address of a Bank Melli branch in a country occupied by US troops: "Location: No. 111-27, Alley 929 District, Arasat Street, Baghdad, Iraq."
That a bank described by the United States as an Iranian facilitator of terrorism operates freely in the heart of Iraq's capital is ironic, to say the least, given the Bush Administration's near-declaration of war against Iran's involvement in Iraq. Citing evidence that Iran supplies arms, money, logistical help and training to Shiite militias and insurgents, hawks in the Administration, including Vice President Cheney, have suggested that US forces in Iraq may strike supply lines, training camps and weapons depots across the Iranian border, even at the risk of igniting all-out war.
Despite its very public saber-rattling against Iran, however, the United States has spent most of the past five years in a de facto alliance with Iran in support of the Shiite-led (and US-installed) regime in Baghdad. The most powerful component of that regime, the Islamic Supreme Council of Iraq (ISCI) and its disciplined Badr Corps militia, is also Iran's closest Iraqi ally. Taking advantage of the political vacuum created by the US destruction of Saddam Hussein's government, Tehran has established a vast presence, both overt and covert, in Iraq, with enormous influence among nearly all of its western neighbor's Shiite and Kurdish parties. "The American military occupation of Iraq has facilitated an Iranian political occupation of Iraq," says Chas Freeman, a former US ambassador to Saudi Arabia.
As a result, the Iraq of 2008 is a tale of two paradoxes.
The first paradox, at once startling and ironic, is that Washington's decision to topple Saddam's government has put in place a ruling elite that is far closer to Iran than it is to the United States. As a result, the ayatollahs in Tehran have adroitly checkmated (a word derived from the Persian shah mat, "the king is dead") US efforts to install a compliant, pro-American regime in Baghdad as the anchor of Washington's interests in the oil-rich Persian Gulf. Now a proxy conflict between the United States and Iran is playing out on Iraq's complex chessboard. Depending on the course that US-Iranian relations take over the rest of Bush's tenure and the start of the next administration in Washington, Tehran has two options. If US-Iran ties improve, Tehran may try, at least in the short term, to broker a deal to stabilize Iraq, albeit one that fortifies the Shiite-led government in a way that accommodates Iran's regional interests. Or, if relations with the United States worsen, Iran can use its allies and agents in Iraq to end the relative calm and send the country tumbling back into all-out civil war.
The second paradox is that despite Iran's enormous influence in Iraq, most Iraqis -- even most Iraqi Shiites -- are not pro-Iran. On the contrary, underneath the ruling alliance in Baghdad, there is a fierce undercurrent of Arab nationalism in Iraq that opposes both the US occupation and Iran's support for religious parties in Iraq. In recent months, this nationalism has begun to express itself in many ways, from the national outpouring of support for the country's victorious soccer team last summer to the potent anger provoked by efforts to privatize Iraq's oil industry, by the Blackwater security firm's shooting of civilians in a Baghdad traffic circle and by suggestions in Washington that Iraq ought to be partitioned into three ministates. In addition, many Iraqi Shiites, like Iraqi Sunnis, harbor bitter feelings against their Persian neighbor left over from the bloody 1980-88 war, which left hundreds of thousands of Iraqis dead. "There is such a thing as Iraqi nationalism, and the default position tends to be one of hostility toward Iran," says Freeman. "Removing the US occupation as the focus of nationalism will almost certainly lead to a renewal of that nationalism's focus on Iran."
Meanwhile, as Iran competes with the United States for influence in Iraq, Tehran is hedging its bets beyond ISCI, building up an impressive portfolio of political, economic, religious and military holdings in its western neighbor. There is a steadily increasing trade, including a black market, across the Iran-Iraq border, and the Iranian government and its state-owned entities have made significant investments in and loans to Iraqi businesses and the rebuilding of Shiite holy cities. There are longstanding clerical ties between Qom, Iran, and Najaf, Iraq, and tens of thousands of religious pilgrims -- no doubt including more than a few Iranian intelligence officers -- cross the border every month. In March Iranian President Mahmoud Ahmadinejad plans to make the first state visit by an Iranian leader to Baghdad.
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Robert Dreyfuss is the author of "Devil's Game: How the United States Helped Unleash Fundamentalist Islam" (Henry Holt/Metropolitan Books).
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