The Bush Administration’s hawks and their neoconservative allies at the American Enterprise Institute (AEI) and The Weekly Standard are engaged in a high-risk and high-stakes effort to restore their fading power in Washington by pressing for a confrontation with Iran. It’s no secret that the neocons’ star has fallen since the war with Iraq. The intelligence scandal plaguing the White House and the ongoing crisis in Iraq itself can both be laid at their doorstep, and it’s widely believed that President Bush’s re-election team would dearly like to extricate the President from the Iraqi tar baby.

But the neocons aren’t giving up, and they are trying to pull the White House in even deeper. Not only are they undeterred by the chaos in Iraq, but they are pressing ahead to advance their regional strategy, one that calls for regime change in Iran, then Syria and Saudi Arabia. Says Chas Freeman, who served as US Ambassador to Saudi Arabia during the first Gulf War and a leading foe of the neocons, “It shows that they possess a level of fanaticism, or depth of conviction, that is truly awesome. There is no cognitive dissonance there.”

What makes the neocon strategy on Iran especially risky is that with Iraq teetering on the brink of civil war, neighboring Iran has significant clout inside Iraq, including ties to various Iraqi Shiite factions and a growing paramilitary and intelligence presence. If Iran chooses, it can help ease the daunting task that the United States faces in trying to put together a sovereign Iraqi government. But if it seeks confrontation, it can help spark an anti-US revolt in southern Iraq, home to most of Iraq’s Shiite majority. In that case, nearly all analysts agree, the American occupation could be overwhelmed.

Leading the charge against Iran is AEI’s Michael Ledeen, perhaps best known for setting in motion the US-Israeli arms deal with Iran in the mid-1980s that became known as Iran/contra. Supporting Ledeen’s position are two other AEI fellows: Richard Perle, the ringleader of the neocons and a former member of the Pentagon’s Defense Policy Board, and David Frum, a Weekly Standard contributing editor and the former White House speechwriter who coined the phrase “axis of evil.” In their new book, An End to Evil, Perle and Frum call for a covert operation to “overthrow the terrorist mullahs of Iran.” Speaking to retired US intelligence officers in McLean, Virginia, in January, Ledeen called Iran the “throbbing heart of terrorism” and urged the Bush Administration to support revolutionary change. “Tehran,” he said, “is a city just waiting for us.”

Ledeen is viewed skeptically by many experts, including at the State Department and the Central Intelligence Agency. “Ledeen doesn’t know anything about Iran,” says Juan Cole, a professor at the University of Michigan who is an expert on the Shiites of Iran and Iraq. “He doesn’t speak Persian, and I believe he has never been there.” But Ledeen does have connections in the Iranian exile community. For the past two years, he has maintained a relationship with Manucher Ghorbanifar, the Iranian wheeler-dealer who worked closely with him in Iran/contra. Ledeen introduced Ghorbanifar to a key neoconservative official, Harold Rhode, a longtime Pentagon staffer who speaks Arabic, Farsi, Turkish and Hebrew and who until recently served in Iraq as a liaison between the Defense Department and Ahmad Chalabi. Rhode and another Pentagon official, Larry Franklin, have been talking to Ghorbanifar about options for regime change in Tehran. “They were looking at getting introduced to alleged sources inside Iran, who could give them some inside information on the struggles in Iran,” said Vince Cannistraro, a former CIA counterterrorism chief. Ghorbanifar, he said, was spinning tall tales about alleged (but unsubstantiated) transfers of Iraqi uranium to Iran’s nuclear weapons program.

Rhode and Franklin were critical players in the campaign for war against Iraq. In 2002 they helped organize the Pentagon’s Office of Special Plans, the Iraq war-planning unit whose intelligence staffers are now under investigation by the Senate Select Committee on Intelligence for allegedly manipulating evidence about Iraq’s nonexistent weapons of mass destruction and ties to terrorism. Both the OSP and the Rhode-Franklin effort on Iran were run out of the office of Douglas Feith, the Under Secretary of Defense for Policy and a key neocon ally. Their initiative on Iran reportedly drew a sharp protest from the State Department. Newsday quoted a US official who said that the entire effort was designed to “antagonize Iran so that they get frustrated and then by their reactions harden US policy against them.”

There is widespread disagreement about both Iran’s intentions in Iraq and the extent of its capability to cause mischief there. But there is a consensus that Iran can exercise significant power. It has close ties to the Supreme Council for the Islamic Revolution in Iraq, whose Badr Brigade paramilitary force of about 10,000 was trained by Iran’s Revolutionary Guard, and to the forces of Muqtada al-Sadr, a 30-year-old Shiite firebrand. “There are thousands of Iranian intelligence agents and operational agents inside Iraq today, and the border is completely open,” says Amatzia Baram, an Israeli expert on Iraq.

So far, analysts say, Iran has chosen to play a waiting game. Ken Katzman of the Congressional Research Service says that Iran “views its interest to play it low-key, to keep a low profile and continue to promote a cohesive Shiite bloc in Iraq in order to be in a position to become dominant once the United States leaves.”

The “realists” inside the Bush Administration, led by Secretary of State Colin Powell and Coalition Provisional Authority head Paul Bremer in Iraq, are well aware that Iran could deal a fatal blow to the already faltering US efforts. Partly as a result, they’ve engaged in a quiet dialogue with Tehran. According to the Financial Times, last May Iran offered a “road map” for normalizing US-Iranian relations. Since then, Powell and his allies have sent assistance after the devastating earthquake in southeast Iran, and offered to send a delegation led by Senator Elizabeth Dole. They’ve also supported efforts by Germany, France and Britain to work a deal with Iran over its nuclear weapons program. (Germany’s intelligence service also brokered a prisoner exchange between Israel and Hezbollah, which is close to Iran.) But of late, some of those conciliatory efforts have stalled. A planned Congressional staff delegation to Tehran, the first since the rise of Ayatollah Khomeini’s regime in 1979, was canceled by the Iranians, according to the office of Senator Arlen Specter, whose staff was to participate. And after the initial harmony, signs are emerging of a serious split between Washington and Europe over Iran’s nuclear program, with echoes of the US-Europe split over Iraqi WMD.

How the differing approaches–the neocons’ war cries and the realists’ more conciliatory strategy–are viewed by Iran’s leadership is anybody’s guess. But there are at least several factors that might push the Iranian ruling elite in the direction of the confrontation the neocons want. First, the hard-line clergy are in the midst of a crisis with the so-called reformists. In the past, the mullahs have used anti-US rhetoric, and even militant actions, to trump liberal and reformist rivals. Second, while Iran welcomes the rise of Shiite power in Iraq, it is at the same time uneasy about losing influence to the mullahs in Najaf and Karbala. According to several experts on Shiism, Grand Ayatollah Ali al-Sistani is now the leading Shiite cleric in the world, which could make him a rival to Iran’s less prestigious clerics. Though Sistani has foiled US policy in Iraq by insisting on direct elections, he has refused to denounce the US occupation and may cooperate with a UN-brokered compromise for creating an Iraqi government. “Sistani is a double-edged sword for Iran,” says Juan Cole. And third, there is the Bush factor. Some neoconservative strategists argue that Iran will act decisively in order to prevent Bush from being re-elected. Raymond Tanter, a scholar at the Washington Institute for Near East Policy, a pro-Israel think tank, predicts, “They are going to launch a political-military campaign in an effort to defeat President Bush, because they believe that if Bush is re-elected, he will do to them what he did to Iraq.”

It’s unclear that Iran would risk a confrontation with the United States in Iraq even if the mullahs do believe that they are next on Bush’s invasion list. But the mullahs are famous for misunderstanding US politics, just as Americans have failed repeatedly to understand Iran’s.

In a way, the neocons’ Iran project is very similar to the early phase of their Iraq one. It includes a steady drumbeat of threats and warnings, Washington lobbying, a media offensive and support for exile groups–in Iran’s case a mishmash that combines supporters of Khomeini’s grandson; Reza Pahlavi, the son of the fallen Shah, and the Iranian monarchists; and the Mujaheddin e-Khalq (MEK), a 3,800-strong exile force based in Iraq. In one of the strangest events ever to occur at a Washington think tank, last September Khomeini’s grandson–dressed in rough-hewn black and brown robes and crowned by a turban, with dark brooding eyes like his grandfather’s–took the podium at AEI, introduced by Michael Ledeen, to call for US assistance to overthrow the Iranian government. He even welcomed an alliance with the Pahlavi monarchists.

Many analysts view the prospects of a Pahlavi-Khomeini-MEK alliance with exceeding skepticism. And they note that the neocons, having bungled Iraq, don’t have a lot of credibility left on Middle East policy. But it would be wrong to count them out. A former CIA officer who took part in the debate over Iraq policy in the 1990s recalls how the neocons ultimately prevailed. “The neocons had this idea of working with the Iraqi opposition to arm and train them and to overthrow Saddam Hussein, and people like me said, ‘That is really stupid,'” he says. “But you get people to think about it, you get the President engaged, then options expand and then when opportunities come along, you seize them. That’s what they did. They got people to buy in. Before September 11, people told them, ‘It’s never going to happen.’ Come September 12, the rules changed.” An explosion in Iraq, and some Iranian mischief there, and the rules could change again.