By Richard Engel Chief foreign correspondent
NBC News
updated 7/19/2004 5:56:22 PM ET 2004-07-19T21:56:22

The war in Iraq both toppled Saddam Hussein and shifted the political balance in the Middle East.  One of the major changes in Iraq over the last year has been the increasing influence in Iraq of its neighbor, Iran.  Did the war to remove Saddam Hussein empower another country the Bush administration has declared part of the “axis of evil?”

Packed on tour busses, every day Shiite Muslims make a pilgrimage to holy shrines in Iraq.  But it's where they're coming from — Iran — and that country's growing influence that has many worried.

In Karbala, hotels are overwhelmed, so tented cities handle the overflow.  For tens of thousands of Iranians, it's a dream — a trip long forbidden by Saddam Hussein.

Some are putting down roots.  Businessman Sahib Yahia is building a home.  “I hope my sons will soon move here with me,” says Yahia.  So many Iranians are buying land in Karbala, property costs 100-times what it did a year ago.

But there is a growing concern among some Iraqis that Iran's interest in this country is more than just religious — that the goal of the hard-line mullahs in Iran's Islamic government is to bring Iraq under its sphere of influence — using money, funding hundreds of charities, promoting ideology at events like book fairs, and with spies.

One United States official tells NBC News that senior Iranian intelligence agents were operating in Amarah, Iraq, near the Iranian border, within two months of the fall of Baghdad.

And today, thousands of Iranian-trained and financed militiamen operate in Iraq, in places like Karbala and Baghdad.  A senior Iraqi security official tells NBC News that Iran funds Shiite cleric Muqtada al-Sadr's Mahdi army.

United States intelligence and defense sources also tell NBC the Iranian-backed guerilla group Hezbollah provides money and support to Jordanian militant Abu Mussab al-Zarqawi, who Iraqi officials say entered the country through Iran.

Iran's goal, analysts say, is to weaken Iraq, gain control of Shiite religious sites and increase its power in the region.  “If we handle the transition clumsily, if things get out of hand in Iraq, then Iran's influence will grow and that could be very much to our detriment,” says Geoffrey Kemp, a Middle East specialist with The Nixon Center.

That’s a problem for the United States, but it’s an advantage for mullahs in Tehran, who want the United States to stay focused on the chaos in Iraq, and not turn its sights on Iran.

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