An official Iranian delegation is in Baghdad at Washington's request to help resolve the impasse between the US occupation authorities and Shia cleric Moqtada Sadr. Middle East analyst Dilip Hiro says this underlies the influence that the predominantly Shia Iran has on the neighbouring Iraqi Shias.
Moqtada Sadr's popularity partly derives from his links to Iran
The Iranian influence is exercised through different channels - a phenomenon helped by the fact that there is no single, centralised authority in Iran.
The different centres of power include the offices of the Supreme Leader and the President; the Majlis (parliament) and the judiciary; the Expediency Council; and offices of the Grand Ayatollahs in the holy city of Qom, and their social welfare networks throughout the Shia world.
It was the decision of Grand Ayatollah Kadhim Husseini al-Hairi - an Iraqi cleric who had gone to Qom for further theological studies 30 years ago, never to return - to appoint Moqtada Sadr as his deputy in Iraq in April 2003 that raised the young cleric's religious standing.
The more senior Ayatollah Abdul Aziz al-Hakim, a member of the US-appointed Iraqi Governing Council (IGC), is even more beholden to Iran.
He is the leader of the Supreme Council of Islamic Revolution in Iraq (Sciri), which was established in 1982 in Tehran by the Iranian government. He returned to Iraq after spending 22 years in Iran.
Sciri's 10,000-strong militia, called the Badr Brigades, has been trained and equipped by Iran.
Ayatollah Hakim underscored his continued closeness to Iran on 11 February, the 25th anniversary of Iran's Islamic revolution. Opening a book fair in Baghdad, sponsored by the Iranian embassy, he praised the Vilayat-e Faqih (ie Rule of Religious Jurisprudent) doctrine on which the Iranian constitution is founded.
Then there is Grand Ayatollah Ali Sistani, the most senior Shia cleric, who is now being routinely described by the Coalition Provisional Authority (CPA) as a moderate, even pro-Western, even though he refuses to meet either the CPA chief Paul Bremer or any of his envoys, limiting his contacts strictly to IGC members.
Ayatollah Sistani was born and brought up in the Iranian city of Mashhad, and despite his 53 years in Iraq, speaks Arabic with a Persian accent.
Most of his nine charitable ventures, primarily providing housing for pilgrims and theology students, are in Iran. So too are the four religious foundations sponsored by him.
Outside official circles, there are signs of growing Iranian influence among Iraqi Shias.
The religious foundations run by pre-eminent clerics in Iran are funding partially the social welfare services being provided to Iraqi Shias by their mosques at a time when unemployment is running at 60%.
If there is any day-to-day Iranian involvement in the workings of the Sadr network in Iraq, it is in the sphere of social welfare.
Iran's present co-operation with Washington is a tactical move. They want to help stabilise the situation in Iraq to facilitate elections there so the Shia majority can assume power through the ballot box, and hasten the departure of the Anglo-American occupiers
There is no need for Iran's Islamic Revolutionary Guard to train the militiamen of Sadr's Mehdi Army since all Iraq males have received three years of military training under the Baathist regime and the country is awash with small arms and ammunition.
Also, Iranian Shias are pouring into Iraq, which has six holy Shia sites, across the unguarded border at the rate of 10,000 a day.
They are thus bolstering the Iraqi economy to the tune of about $2bn a year, equivalent to two-fifths of Iraq's oil revenue in 2003.
Then there are covert activities purportedly sponsored by Iran.
Soon after Saddam's downfall, some 100 "security specialists" of the Lebanese Hezbollah arrived in Basra, at the behest of the Iranian intelligence agency, according to the Anglo-American sources.
Since then two groups of Iraqi Shias calling themselves Hezbollah have emerged, one of them allegedly sponsored by Iran's Islamic Revolutionary Guard, with its headquarters in Amara and branches in other cities.
This is widely seen as a move to establish an Iranian intelligence infrastructure in Iraq. However, such a network can hardly compete with its Anglo-American rival.
Until a few days ago, conceding any role to the Islamic Republic of Iran has been anathema to the George Bush administration.
It is hell bent on seeing that the Iraqi politicians refrain from declaring Iraq an Islamic republic. Paul Bremer publicly announced that if those writing the transitional constitution made any such move, he would veto the document.
But present signs are that a large majority of Shias, led by Ayatollah Sistani, favour an Islamic entity of some sort for Iraq. About half of Iraq's Sunnis are also believed to support this.
Iran's top officials are aware of this. They are aware too of what the US occupation authorities have done in Iraq.
Their present co-operation with Washington is a tactical move. They want to help stabilise the situation in Iraq to facilitate elections there so the Shia majority can assume power through the ballot box, and hasten the departure of the Anglo-American occupiers.
"America accuses other countries of intervening in Iraq and provoking the Iraqis, but it clear that the crimes committed by the occupying forces and their insulting behaviour toward Iraqi youth and women are the cause of the Iraqi reaction, whether Sunni or Shia," Iranian Supreme Leader Ayatollah Ali Khamanei said in a speech delivered recently on state radio.
"Sooner or later, the Americans will be obliged to leave Iraq in shame and humiliation."
Dilip Hiro is the author of Iraq: A report from the inside. His latest book is Secrets and Lies: Operation "Iraqi Freedom" and after.