Until last year, Tehran played brilliantly within the margin of manoeuvrability opened to it by the rift between Europe, China and Russia, on the one hand, and the US, on the other. Blazoning millions of dollars worth of oil contracts with major petroleum companies from the former areas, it succeeded voiding the American-led drive against it of all substance and driving sharp dents into the NATO front. The rift between the US and other international powers simultaneously enabled Tehran to sustain its regional presence and to develop this into one of its primary strategic strengths.

Since then, however, the European and American stances towards Iran have converged to near conformity, especially after Tehran's decision to resume work in its nuclear research centre in Isfahan and its uranium plant in Natanz. After having steadfastly resisted US pressures for two years in their hope of reaching a negotiated settlement with Iran, the countries of the so-called Troika (Britain, German and France), which had spearheaded these negotiations, now support the American demand to bring the case of Iran's nuclear programme before the Security Council.

If Russia has long been the most sympathetic to Iran's insistence on its rights to develop its nuclear technology, it, too, is likely to change its position soon. Moscow had offered Tehran the face- saving opportunity to let its scientists refine Iranian uranium on Russian soil. The initiative would have conquered several birds with one stone. It would have kept Tehran's nuclear ambitions under skein of silken diplomatic restraints as it would be taken for read that Tehran could not, therefore, possess the full fuel cycle needed to power nuclear weaponry. This, in turn, would have forestalled Washington's designs to escalate its campaign against Iran diplomatically and militarily. At the same time, Russia would be able to maintain its economic, military and strategic interests in Iran. Tehran rejected the Russian offer, leaving Moscow little alternative but to toughen its stance towards Iran if it does not want to jeopardise its relations with Washington.

As the foregoing suggests, Iranian leaders are in no small measure responsible for the changing tide of opinion against them. Their handling of the nuclear issue has changed radically since only a little over a year ago. At the end of 2004, in Paris, they agreed to a voluntary halt in their uranium enrichment activities until an agreement over the issue could be struck with the Troika. Contrary to the claim of current Iranian President Mahmoud Ahmadinejad, that move was not a "compromise," but rather a very astute manoeuvre at the appropriate time. As long as Iran was involved in negotiations with Europe, regardless of how wildly they fluctuated between near success and near failure, Tehran enjoyed a form of international cover, which protected it from the escalating onslaught from Washington and beneath which it could strengthen its hand against the US by consolidating its regional influence and, more importantly, securing allies in positions of power in Iraq.

It is in this regard that the timing of Iran's shift in tactics is particularly significant. One can not help but to notice that its decision to back out of the Paris agreement and resume uranium enrichment operations occurred effectively following the announcement of the results of the recent parliamentary elections in Iraq. It was those elections that put paid to Washington's hopes that even a small piece of the power pie in Iraq would go to certain political and sectarian parties, thereby weakening the relatively large majority held by Iran's major ally in that country, the Shia United Iraqi Coalition.

Perhaps decision-makers in Iran feel that the prudence they had shown until last year -- or more appropriately, their policy of dissimulation under duress -- was no longer sustainable as the international balance shifted against them. Having given their nuclear development programme such high priority and having over previous years mobilised public opinion in support of this programme, they have landed themselves in something of a predicament. Now, even if they wanted to lower the ceiling of their nuclear ambitions they could not without losing considerable credibility at home.

The development of a nuclear capacity has come to epitomise the Iranian national dream, the interpretation and pursuit of which is monopolised by the power centres of the Islamic republic. Moreover, there is a closer meeting of minds than ever in these power centres, now that the conservatives have come to dominate all the country's executive and legislative institutions, to the almost total exclusion of the reformists, a development that was crowned with the rise of Ahmadinejad as president of the republic. Certainly this helps to account for the current tenor of Tehran's diplomatic and media drive. If achieving a nuclear capacity is not just one of the aims, but the ultimate aspiration of the regime and the cornerstone of its legitimacy, it has little alternative, in view of the logic of domestic politics, but to meet mounting pressures from abroad with an escalation of its own. This has taken the form of the decision to restart uranium enrichment operations regardless of the consequences.

"Keep your gold and intentions to yourself," goes a Shia saying cautioning against publicising the extent of your wealth and your financial dealings. The regime in Tehran has clearly cast this adage to the winds, or, at least cast it in a different mould. The oil and natural gas-rich country no longer makes a secret of its lust after "yellow cake" and its intent to control all possible means to develop its nuclear technology.

US Secretary of State Condoleezza Rice said Iran "crossed the threshold" by reactivating its research work and threatened Tehran with isolation -- à la Saddam Hussein -- while not forgetting to sympathise with the Iranian people. "I would hope that seeing the very powerful reaction of the international community, Iran would now take a step back and look at the isolation that it is about to experience," Rice told reporters on 12 January. "The Iranian people, frankly, deserve better."

Speaking in a joint press conference with conservative German Chancellor Angela Merkel, President George W Bush said a nuclear Iran was unacceptable and he singled out Israel for special US concern. "I want to remind you that the current president of Iran has announced that the destruction of Israel is an important part of their agenda, and that's unacceptable," Bush said. "And the development of a nuclear weapon, it seems likely to me, would make them a step closer to achieving that objective," he added.

A number of influential US lawmakers soon flamboyantly joined the foray. Republican Senator Lindsey Graham told Fox News Sunday that military intervention shouldn't be ruled out while Senator John McCain, another influential Republican, told CBS television's Face the Nation the same day that "the military option is the last option but cannot be taken off of the table."

Behind this tough line from US decision makers came an array of cheerleading from think tanks, lobbying groups and media organisations -- the same network that was instrumental in rallying public support for the US invasion of Iraq in 2003.

Pro-Israel groups and organisations have been particularly vociferous in their lobbying for a more hard-line US position against Tehran. The American Israel Public Affairs Committee (AIPAC), which had only a month ago criticised the US position towards Iran as too lenient when the administration accepted a Russian proposal to defuse the crisis with Iran, has called for renewed effort to stop Tehran gaining nuclear technology. The group now fronts a special file on Iran entitled "Decades of Deception: Iran's Pursuit of Nuclear Weapons" on its Web site. Visitors are greeted with the lobbying group's pledge: "Iran must be stopped before it develops nuclear weapons."

AIPAC is credited for pushing Congress and the administration towards a number of legislative initiatives hostile to Iran and for placing Tehran's nuclear programme at the top of the international agenda.

Another pro-Israel group, the American Jewish Congress (AJC), says it too is intensifying efforts to convince the international community of the need to stand up against Iran. "The resumption of their nuclear programme is an affront to the international community, and a threat to Israel, and to every other nation in the range of their missiles," AJC President Paul Miller, said in a statement. "The international community must take the steps necessary to prevent Iran form developing nuclear weapons," he added.

The American Jewish Committee, a third group, launched a new campaign this year to push world leaders to adopt a set of measures penalising Iran, some of them borrowed from policies buttressed by Israel and the United States on Saddam Hussein's regime for years under UN sanctions. These include convincing countries to recall diplomatic envoys to Tehran, expelling Iranian diplomats, suspending Iran from a range of international organisations, and imposing economic sanctions.

Like the Iraq invasion scenario, a number of think tanks whose experts flood television stations and newspaper columns back this lobbying-cum-professional political activism sold to the US public as analysis. The Brookings Institution, for example -- an integral part of the intellectual padding of US foreign policy and whose Middle East programme is now increasingly pro-Israel -- devoted its email alert on Monday to what it calls "Iran's defiance".

Some of the Washington-based institution's media-savvy activists, who had previously preached a military invasion of Iraq, have now urged Washington to consider military strikes against Iran. Kenneth M Pollack, director of research at the Saban Centre on Middle East Policy told a Congressional hearing in September that the US should study the possibility of waging a targeted air campaign aimed at Iran's nuclear facilities as a last resort.

The Saban Centre is funded by a grant from Haim Saban, an Egyptian-born Israeli American billionaire who made his money in the entertainment business. Martin Indyk, a staunchly pro-Israel former US diplomat who once served as US ambassador to Israel, directs it.

More obvious, perhaps, is the work of the American Enterprise Institute, a bastion for neoconservatives, and that of the Washington Institute for Near East Policy, an offshoot of AIPAC now advised by former US Middle East Envoy Dennis Ross. The two organisations cooperated in publishing a book last week: Eternal Iran: Continuity and Chaos by Michael Rubin, a researcher at the AEI, and Patrick Clawson, deputy director of the Institute for Near East Policy. The book, an archetypal work of pro-Israel activism in Washington, urges the West not to take the Islamic republic's stability for granted and refuels Western concerns over ethnic and religious minorities, conditions for women in Iran, as well as the country's nuclear programme.

Rubin has written in neoconservative publications such as the New Republic, The Wall Street Journal and The Jerusalem Post and Middle East Quarterly while Clawson hasn't shied in his media appearances from advocating military action against Syria and Iran.

Similar to events preceding the Iraq war, the campaign is crunching up media space in America also. The right-wing editorial pages of The Wall Street Journal responded to Iran's resumption of nuclear research by drawing a vague link between Saddam Hussein and Iranian President Mahmoud Ahmadinejad. "As we learned in dealing with Saddam Hussein, so too with Mr Ahmadinejad: Eventually, there's a price to be paid for trafficking in unserious consequences," the editorial read.

More indicative of all is how William Kristol, editor of the neo-conservative publication The Weekly Standard, entitled in his column: "And now Iran."

Indeed, 26 years after the Iranian revolution, the mystery behind the swinging political pendulum of the theocratic Iranian republic has continued to confound policymakers and Iran watchers alike. Dissecting the opaque Iranian political system is a challenge that must be met especially in light of the nuclear standoff between the Iranian regime and the West. This show of audacity has been deemed the "greatest source of political risk in 2006", as further Iranian intransigence could trigger eventual military responses from either the US or Israeli military.

Khamenei was elevated to the position of the velayat-e-faqih or Guardian of the Jurist upon the death of the charismatic ayatollah Ruhollah Khomeini in 1989. Khamenei was hand-picked by Khomeini. However, he had neither the overwhelming support of the public nor that of the clerical establishment, which looked upon Khamenei's appointment with disdain. As a cleric, Khamenei had only limited clerical education, having never obtained the necessary clerical credentials to ascend to the position of the faqih. Having served as the first clerical president of the Islamic Republic and having received Khomeini's the blessing, Khamenei was guaranteed to inherit the theocratic throne, but not without considerable factional challenges.

Ironically, factionalism is enshrined in the Iranian political system. These factions have competed in the parliament, often reinventing themselves, creating not only a level of competition but also a clear sense of patrimony. With parliamentary elections every four years, factional shifts in the system occurred in 1992 in the aftermath of the Iran-Iraq War and in 2000 when reformist politicians brought wind of a "Tehran spring". Indeed, the reformist challengers to the Iranian state were marginalized in the 2004 parliamentary elections due to the much-maligned, behind-the-scenes direction of the supreme leader.

Equally important to the Iranian political structure is the institutional system. Modeled after the French political system with a parliament, president and judiciary, the government maintains clerical oversight bodies that are appointed by the supreme leader. The former institutions have been dominated by factional competition as evidenced by the reformist emergence. Indeed, president Mohammad Khatami's 1997 and 2001 electoral victories posed political challenges for the clerical conservatives.

After 16 years at the helm, though, Khamenei has learned to use this factionalism and institutional control to his advantage, pitting those who support him against those who do not. Using unelected institutions such as the Guardian Council to vet candidates prior to elections and to negate legislation passed by the reformist parliament, Khamenei enabled the final consolidation of conservative power evidenced in the recent round of elections when only clerically approved candidates were permitted to run for political office.

Khamenei has remained mostly behind the scenes, relying on the public face of the president to play his part in this political drama. However, the supreme leader is embarking on a new era. For eight years, Khatami provided the ever-hopeful West the facade of an evolutionary Iran. Traveling abroad with promises of a "dialogue among civilizations and cultures", Khatami was successful in restoring Iran's public face and international image. Out of sight, however, lay a veneer of a revolutionary Iran, for he too had unleashed a domestic challenge to the clerical elite. For Khamenei, this could not be tolerated. Not only was Khatami disturbing the domestic status quo but his presence upstaged that of the already unpopular supreme leader.

With Khamenei neither as popular or charismatic as his predecessor Khomeini, nor Western-educated to attract the youth as was Khatami, he tactically fomented support through a new factional grouping: the ideological underclass of the revolution. Finding allies in the Islamic Revolutionary Guards Corps (IRGC) and other ideological supporters of the revolution, Khamenei consolidated his power by surrounding himself with a cadre of loyalists willing to adhere to the revolutionary creed that would protect and preserve the umbilical cord of the Islamic Republic. From the rank and file of this devoted group came the son of a blacksmith, Ahmadinejad, the ever-devoted son of the revolution.

Indeed, the successful election of Ahmadinejad is the culmination of Khamenei's masterful engineering. With Western expectation for continued nuclear negotiation, Khamenei permitted Ahmadinejad's aggressive nuclear posturing, commencing with his rejection of the EU-3 (Germany, Britain and France) proposals in August and continuing with the recent resumption of nuclear "research" this past Monday. Ahmadinejad has inflamed constituencies right and left with his anti-Zionist rhetoric, even garnering censure from his own conservative parliament. The supreme leader recently elevated former presidential candidate and head of the powerful Expediency Council, Hashemi Rafsanjani, giving him supervisory power over the elected branches of government. In effect, Ahmadinejad has created much dissension among the clerical rank and file.

Such antagonistic policy has been a political coup for Khamenei as he has mobilized popular support behind the nuclear program as well as demonstrated to the international community that the Iranian president is indeed fanatical in his orientation and objectives. For the supreme leader, who has spent 16 years isolated in power, Ahmadinejad's unleashing is being manipulated to his benefit. By taking Iran to the brink, Khamenei, the ultimate arbiter, will be the moderate one who can take Iran back.

In this vein, he will emerge having successfully consolidated his power, with a motivated Iranian public supporting a restrained role for the overzealous Ahmadinejad and room to maneuver again at the nuclear negotiating table. His tactics will finally win him his long-awaited support both from domestic parties, which seek to contain the fanatical Ahmadinejad, and from the international community, which hopes Iran will tone down its rhetoric and cooperate with an ever-impatient international community. Perhaps now, Khamenei can feature as producer, director and lead actor in the unfolding Iranian drama, finally winning the hearts and minds of the public.

It is said that there is the reason they give; and then there is the real reason. Nowhere is this more true, perhaps, than in Iran.

My experience with Iran began four and a half years ago in June 2001 when, through my Iranian business partner, I wrote to the then governor of the Iranian central bank, Dr Mohsen Nourbakhsh.

This letter was written on the basis of my experience as a former director of the International Petroleum Exchange and in the aftermath of allegations I made in relation to market manipulation on the IPE the previous year, which were dismissed by a commissioner appointed by the exchange. I still regret that I used the description "systematic" rather than "systemic" of this alleged manipulation, but that is another story.

In this letter I pointed out that the structure of global oil markets massively favors intermediary traders and particularly investment banks, and that both consumers and producers such as Iran are adversely affected by this. I recommended that Iran consider as a matter of urgency the creation of a Middle Eastern energy exchange, and particularly a new Persian Gulf benchmark oil price.

It is therefore with wry amusement that I have seen a myth being widely propagated on the Internet that the genesis of this "Iran bourse" project is a wish to subvert the US dollar by denominating oil pricing in euros.

As anyone familiar with the Organization of Petroleum Exporting Countries will know, the denomination of oil sales in currencies other than the dollar is not a new subject, and as anyone familiar with economics will tell you, the denomination of oil sales is merely a transactional issue: what matters is in what assets (or, in the case of the United States, liabilities ) these proceeds are then invested.

After a couple of years of apparent inaction, my colleague and I were invited to put together a consortium to tender for a project to create such an exchange and, after a presentation at the central bank in Tehran in May 2004, we were successful, as reported in The Guardian at the time. We subsequently learned that the delay had been due to initial opposition from the Saudis and this opposition was withdrawn after the attacks of September 11, 2001, and the subsequent US-led invasion of Iraq.

A major feasibility study was carried out in the summer of 2004 - for which we still have not been paid by the Iranian Oil Ministry - and after this, the process became bogged down in turf battles between the Oil Ministry and the Ministry for the Economy.

We met president Mohammad Khatami in December 2004 to resolve this problem and then spent considerable time with his close advisers, from whom we received powerful backing. Progress was made, to the extent that an exchange entity was incorporated and premises purchased on Kish Island in the Persian Gulf.

In the second quarter of 2005 the real opposition from within the Oil Ministry - from factions opposed to shedding any light on the sales regime - was becoming apparent. However, as the battle was about to be joined, Khatami's period in office came to an end and the presidential election in August intervened.

Neither we, nor anyone we knew, expected the result of the election, still less the events after it. Three times over a period of three months an oil minister was nominated by the new president, Mahmud Ahmadinejad, from among his trusted colleagues and three times they were turned down by the majlis (Iranian parliament), until finally an experienced insider was appointed in early December. Only now are further levels of appointments being made by the new minister.

Ahmadinejad is on record as saying that he favors transparency in the Iranian oil market. As anyone familiar with the City of London and Wall Street will know, transparency is the enemy of private profit, and it is this factor that was behind the delays in developing the bourse project.

However, we remain hopeful that the strategy we recommended, which is based upon (a) gradual and organic introduction of pricing built upon the neutral function of transaction registration and (b) a simple (and Islamically sound) partnership-based "clearing union" synthesis of bilateral trading and a multilateral guarantee, will in due course be taken forward.

One of the most interesting aspects of the process was that during our brief spell of contacts with decision-makers, some insight into current Iranian policy was possible - in particular, the nuclear question. In our conversations we were left in no doubt that it suits both the US and Iran for the issue to be seen to be that of the Iranian "threat" from nuclear weapons.

In fact the issue is a proxy for Iraq: try looking in the media prior to the events in Fallujah, Iraq, for anything more than desultory mention of this "issue". But once factions in Iran funded Muqtada al-Sadr to the tune of $50 million and the US body count started to rise, then the issue began to attain its current level of importance.

Now that pro-Iranian Shi'ite elements are taking a primary role in the emerging government in Iraq, we see the nuclear temperature rising further.

The realpolitik is of course that those in power in the US and Iran have the reason they give - and the real reason - for what they do: and for the US, the real reason is and has been for many years energy security above any other consideration.

Chris Cook is a former director of the International Petroleum Exchange. He is now a strategic market consultant, entrepreneur and commentator.

The Jerusalem Post quoted a news story from Koelner Stadtanzieger arguing that one of those sensitive tasks may be to “prepare for possible air strikes on Iran.” Given the case, it is a possibility that MOSSAD agents have leaked into Iran somehow.

The Israeli administration cannot be kept from engaging in the nuclear crisis with Iran, said the BND official, emphasizing “the gradual increase in the number of MOSSAD agents with a German passport.”

Most of the passports granted to Israeli agents actually belong to German citizens who cannot possibly leave European Union (EU) countries, thus they will not discover that their passports are being misused, the same official added.

German intelligence is not in a position to specify how such papers are used as passports. Israeli agents used passports originating from New Zealand and Canada while carrying out operations in “enemy lands” in the 1990s, according to the Jerusalem Post; however, when this was found out, German passports became popular with Israeli agents. MOSSAD also used identity details of the deceased, the BND official added.

Central Bank Governor Ebrahim Sheibani was quoted earlier as saying Tehran had started shifting funds, but he sidestepped a question on whether the assets would go to accounts in Asia.

It is far from clear how placing assets in Asia or anywhere abroad would protect them from being frozen as few governments or major banks would be willing to flout U.N. sanctions openly.

The United States and the European Union want the International Atomic Energy Agency (IAEA) to refer Iran to the Security Council at an emergency meeting on February 2.

The council has the power to impose trade or diplomatic sanctions, though no swift action to punish Iran is likely.

Russia and China, which both have major commercial interests at stake in the Islamic Republic, have urged caution.

Iran's ambassador to the IAEA in Vienna said hauling his country to the council would be difficult because of the views of Russia, China and some European and developing countries.

"Sending Iran to the Security Council lacks a legal basis," Aliasghar Soltaniyeh told the semi-official Fars news agency.

Iran is trying to avoid U.N. censure or sanctions over its nuclear program, which it says is entirely peaceful. The West suspects it of secretly seeking nuclear weapons.

Talk of shifting foreign assets indicated how seriously the Islamic Republic is taking the threat of U.N. sanctions.

"We transfer foreign reserves to wherever we see as expedient. On this issue, we have started transferring," Sheibani told the ISNA students news agency.

Iran has bitter memories of its U.S. assets being frozen shortly after the 1979 Islamic revolution.

OIL JITTERS

Worries over Iran helped push oil above $67 on Friday and an Iranian proposal to slash a million barrels a day off OPEC production from April was not calculated to calm markets.

OPEC governor Hossein Kazempour Ardebili told the Mehr news agency the cut was needed because markets are oversupplied by some two million barrels per day, which he said could cause an oil price collapse in the second quarter of the year.

Most traders are more concerned about a shortage of spare capacity and an array of geopolitical risks than any glut.

China's state-run press urged Iran to halt nuclear work and return to talks with Britain, France and Germany, but argued against taking Tehran to the Security Council.

"Negotiations remain the best option, as sanctions will muddy the waters," the China Daily said in an editorial, saying Iran must return to negotiations with the European Union.

The EU trio scrapped the talks last week after Iran removed IAEA seals on uranium enrichment equipment and resumed a suspended nuclear research program. U.S. and EU officials say there can be no more talks unless Tehran reverses these steps.

"The international consensus is unmistakable and important," said the China Daily. "Iran should respond to the diplomatic efforts of the international community."

Iran is the world's fourth biggest oil exporter and the second largest in OPEC. Oil provides 80 percent of its export earnings, which have soared over the past two years.

Economists estimate Iran will have earned more than $40 billion in oil revenues by the end of the year to March 2006. Of this, $16 billion goes straight to budgeted government spending.

The rest goes to the Central Bank of Iran which keeps an unknown amount in foreign accounts. The Naftiran Intertrade Company (NICO), the powerful trade and financing arm of the National Iranian Oil Company, is based in Switzerland.

Shailesh Dash, head of strategic asset management at Kuwait's Global Investment House, said Iran might seek friendly havens for its funds in the Gulf or Asia.

"It's a similar pattern to that which we have seen for the Gulf countries after September 11. If you feel there is a risk of the U.S. imposing sanctions then it makes sense to move those assets to friendly countries, such as the Gulf or Asia."

Swiss banks would welcome asset transfers by Iran, a leading financial industry representative said.

"If you're talking in terms of a safe haven proposal, that's where Switzerland is very strong, stronger than Singapore or other places. We are a country that is non-judgmental," said Steve Bernard, director of the Geneva Financial Center.

Ebrahim Sheibani told reporters that Iran began withdrawing its foreign exchange reserves from European banks and transferring them to an undisclosed location, the semi-official Iranian Students News Agency reported.

Iran is facing possible referral to the UN Security Council for its refusal to give up its uranium enrichment program. The council has the power to impose economic and political sanctions.