Much of the debate over U.S. policy toward Iran has centered on the nature of the current regime; some believe that Iran, a country of about 70 million people, is a threat to U.S. interests because hardliners in Iran's regime dominate and set a policy direction intended to challenge U.S. influence and allies in the region. President George W. Bush, in his January 29, 2002, State of the Union message, labeled Iran part of an "axis of evil" along with Iraq and North Korea.

Iran is materially assisting and influencing major Shiite Muslim factions in Iraq, most of which have ideological, political, and religious ties to Tehran. Among these factions is that of hardline anti-U.S. cleric Moqtada Al Sadr, whose Mahdi Army militia, according to some observers, serves as a proxy force for Tehran against the United States.

This report examines Iran's influence in Iraq post-Saddam. This is in large part because the dominant parties in Iraq have long-standing ideological, political, and religious sectarian ties to Tehran. A key U.S. concern is that Iran, seeking to ensure the political prospects of its proteges, supports Shiite militias that are committing sectarian violence. Since December 2006, the Administration has tried to reverse Iranian influence in Iraq while also engaging Iran diplomatically on Iraq.