Much to America's dismay, its worst nightmare is coming true in Iraq. Iran's influence in Iraq is growing and it is likely that the political regime that will emerge in Iraq after the 30 January elections will be dominated by conservative Shiite clerics linked to Iran.

The Shiite-led political alliance submitted a list of 228 candidates to Iraq's electoral commission led by Abdul Aziz al-Hakim. Should it win the elections, which seems very likely, Hakim would be the most powerful political figure in Iraq. Hakim has close ties with the Iranian ruling clerical establishment and the Iranian secret service. The prospect of Hakim achieving power in Iraq is troublesome for the US, and countries like Jordan and Saudi Arabia which have Sunni Muslim majorities. A Shia-dominated Islamic government in Iraq would radically alter the geopolitical contours of the Middle East.

There are indications that Iran is pouring money into Iraq to influence the elections in its favor. It is also reported that some one million Iranians have crossed into Iraq to vote in the Iraqi elections. Iran is also building pro-Iranian sentiments in Iraq by undertaking welfare activities for the poor and unemployed, and those affected by the continuing violence in Iraq. Iran's Revolutionary Guards are also training some Iranians to foment trouble in Iraq after the elections if the need arises.

The US had hoped that it would be easy for the interim Iraqi Prime Minister Ayad Allawi to win the elections. But this seems very unlikely as Iraqis are highly dissatisfied with the dismal performance of the interim government. An Islamic Republic of Iraq straddling the Iranian Islamic Republic will be a strategic disaster for US foreign policy in the Middle East. Its relations with Iran being at an all time low, the US faces the prospect of losing control of the entire Middle East if Iraq becomes a theocracy aligned with Iran.

This would also increase the possibility of civil war in Iraq with its 20 percent Sunni population feeling increasingly isolated. The American military presence will be caught in the cross-fire of Shia-Sunni violence in Iraq, and no way out without losing face.

However, there are still many who believe that Iraqi clerics, under the leadership of Grand Ayatollah Ali al-Sistani, are not interested in active politics or in holding power directly like their Iranian counterparts. Moreover, there are strong ethnic and cultural divisions that have distinguished the historical fissures between Iran and Iraq, which militates against Iraq becoming a client state of Iran. The Iraqi Shiite population also remains divided among themselves, unable to forge a coherent political bloc that might dominate the minority Sunnis. Ordinary Iraqis remain deeply suspicious of Iran's religious leadership and strongly resent a government dominated by religious figures.

It is clear that US policy in Iraq is at the cross-roads today. The Bush Administration had argued that a "forward strategy of democracy" was needed to tackle the threat of global terrorism. The US, in this view, could only be safe when people in the Islamic world get the same freedom and opportunities as people in other nations. Not only would the transnational terrorist networks be destroyed but a policy of regime change would be pursued by the US to prevent political oppression in Middle Eastern societies that gives rise to terrorism. The war on Iraq was justified by the Bush Administration as part of a larger strategy aimed at the democratization of the Middle East. Though other reasons, like Iraq's WMD program and Saddam Hussein's links with Al-Qaeda, were cited at the time of the invasion, at the strategic level, this was primarily seen as a first step towards setting the entire region on a course towards democratization.

This entire strategic framework of US post-9/11 foreign policy is coming under a cloud, as the chances of Iraq emerging as a secular, democratic republic recede over the coming days and weeks. The US has not yet made clear what political outcome it expects in Iraq. The irony is that the US does not have much leverage to dictate the outcome as the reason it invaded Iraq was to spread democracy. Iran, on the other hand, is better placed to shape the final outcome in Iraq in its favor, and it is doing its best to complicate the situation for the US. Both Iran and the US are engaged in a game of high-stake poker in Iraq, the outcome of which will have reverberations far beyond the borders of Iraq. As of now, however, Iran seems to hold the upper hand.