Iran's influence in Iraq is growing.After Iraqi troops clashed with Shia militants in the southern city of Basra last March, the eventual ceasefire wasn't hammered out inside Iraq. Instead, the agreement was negotiated in Iran with the help of the commander of the Revolutionary Guard Quds Force. For now, an uneasy calm has settled across Basra as Iraqi army troops and police have fanned out across the city. However, Iran's role in quelling the violence hasn't softened the criticism of Tehran.One senior Iraqi official says the Iranian consulate in Basra is "a center for Iranian intelligence gathering under a legal cover." And U.S. military officials still accuse Iran of helping Shia militia groups like those run by hardline cleric Moqtada al-Sadr.

Mohammad Reza Baghban is on the frontline of those accusations. As Tehran's consul general and point man in Basra for the past two years, he took the heat when 11 British sailors were taken captive by Revolutionary Guard forces off the coast of Basra last year and his convoy has been ambushed more than once while traveling through the city. Still, he maintains a sense of humor and brushes off accusations of Iranian meddling in Iraq. NEWSWEEK's Babak Dehghanpisheh recently met with Baghban at the Iranian consulate in Basra.

NEWSWEEK: Has the security situation improved since the British pulled back from Basra last December?
Baghban: There have been a lot of ups and downs. When the English were here it wasn't an ideal situatio n. The occupiers, because of their ignorance and their lack of understanding of social traditions, have created a lot of problems for the people. 

Did the recent security operation by the Iraqi government help?
There has been a noticeable improvement in the security situation. Some of the insecurity and kidnapping has gone down. And the reason is the increase of the security forces in the city. But if the unemployment and other economic problems aren't resolved there could be more instability.

Were there any clashes around you in this latest round of violence?
No, the clashes were mainly in the center and west of [Basra]. There wasn't much happening around here. As a matter of fact, after the British left it got calmer. Because when they were around, it was an excuse [for militants] to fire mortars and rockets. Sometimes they would put bombs in their path.

Have you been attacked?
Yes.

Was someone deliberately targeting you?
The Iraqis haven't told us the result of their investigation. But we're not in the same danger as the British.

Are you in touch with American or British reps in Basra?
We have no contact with the Americans. The British and Americans are based about 200 kilometers [about 120 miles] from here [ laughing ] at the airport. They don't have any contact with Iraqi society other than special occasions--unlike us who live among the people and have a lot of contact with them. We have very limited contact with the British. Their consulate is not very active.

Do you travel around the city freely?
Completely free? No. We don't have any particular problems like [the British] where we have to travel with a column of armored vehicles. But we can't stroll down the street either.

The ceasefire that ended the recent fighting in Basra was reportedly hammered out in Iran between Iraqi politicians, Sadr representatives and General Qassem Soleimani, the commander of the Revolutionary Guards Quds Force. Were you involved from this end?
We didn't have any special communication because the discussions were outside of Basra. The [Iranian] embassy was following up. It was the [Iraqi] government on one side, who was having discussions in Baghdad. And another side was the Sadrists who were having talks outside of Basra anyway.

What's the situation at the nearby border between Iraq and Iran?
We have a lot of border protocols between the two countries. There was a group from the foreign ministry that came to discuss this but none of the ideas have become operational yet. For example, to establish direct communication between border guards. There is some communication now but it's not as much as it should be. The problem is that it's a vast border. There are problems at the marine borders with fishermen and smugglers. With the land borders it's the same. There are smugglers. There are tribes. There are a lot of problems on both sides that need to be monitored continuously.

What's being smuggled between the two countries?
There is some commercial smuggling - for example, video goods are cheaper in Iraq so they get smuggled to Iran. At the same time, there are some things cheaper in Iran which get smuggled to Iraq. When fuel was cheaper in Iran, before the recent rationing, it would constantly get smuggled to Iraq. Benzene, white oil, gas oil- we still have gas oil being smuggled from Iran to Iraq. There's also drug smuggling. After the occupiers came to Iraq then drugs became widespread. At the time of Saddam it was dealt with harshly and the possession of even a gram was not tolerated. There was no smuggling route through Iraq. But slowly Iraq is being transformed into a drug route toward Europe. So this problem can be added to the problems of Iraq after the fall of the regime. There's also the smuggling of weapons. And that again has to do with the situation in Iraq. All the weapons and equipment of the Iraqi army were looted at the hands of the people because of the lack of planning during [former U.S. administrator Paul] Bremer's time. It wasn't a small amount.

U.S. military officials have repeatedly accused you of arming militant groups in Basra.
The Americans want to hang their problems around the necks of others. This is the truth. They talk a lot but they haven't been able to show documentation. And the reason is the Americans still haven't been able to answer the question of where the equipment of the former Iraqi Army has gone. If they can answer this question, then they can say that weapons are being smuggled from Iran or elsewhere. Where is the equipment of the former military? What happened? The Iraqi army was the fifth largest in the world. It was a very formidable military. They fought us for eight years and invaded Kuwait and also dealt with various internal conflicts. These weapons are all now in the hands of the groups that are attacking the Americans or setting off explosions among Iraqi civilians. [The Americans] don't want to accept that a big country like this also has big problems.

U.S. officials have also accused Iran of sheltering militants who escaped the recent fighting in Basra.
The two countries have had relations for a long time. In the summer of last year, we had 1,200 people applying for visas every day. Mostly for religious pilgrimages or seeing families- because there are visits between families on both sides. In Dowlatabad, in southern Tehran, the whole population is Iraqi. Their relatives are here. What are we supposed to do about it?  These are historical ties, not just something that came up in the past three, four, ten years. Saddam couldn't wipe out these ties, much less the Americans. These ties aren't something the Americans can understand.

[The Americans] attack us and say groups have crossed the border to get training and so on. There's nothing of the sort. [The Americans] don't want to accept that people here oppose them. Some people resist them politically, others, like Seyed Moqtada [Sadr], resist them in an armed fashion. This resistance exists among the Sunnis, the Shias and even the Kurds. The Americans have to accept this. And they can't. 

What sort of commercial ties are there between Iran and Iraq in the south?
[We export] mostly foodstuffs - dairy, vegetables, fruit. There are also industrial goods. There is also the transfer of electricity from Khuzestan to Basra. But because of the problems with the Iraqi electrical grid it's not operating at full capacity.

Has there been much reconstruction help?
There is one big problem with reconstruction in Basra and that is the lack of a comprehensive reconstruction plan. Until they put together a plan, not only Iran but no country or company can come. Because they don't know what they want to do. They say they want to fix a particular bridge or something else but it's always in the talking stages. There's no foreign company who's going to come to Iraq to invest 100 million dollars for a one million dollar pay off.

Do you have contact with all the political parties in Basra?
All the important parties, yes.

Is there more of a political struggle or an economic struggle between these parties?
It's a political struggle. A struggle to gain power. There's no doubt about that. But it goes back to the bottom line that the presence of the occupiers feeds the violence.

Do you think the provincial elections scheduled later this year will be violent?
I don't think it will be as bad as what we've seen before.

Are you surprised that these various Shia groups have been fighting against each other?
A part of it is expected if you know this society. Iraqi society is practically a tribal society. In a tribal society, rivalries exist and sometimes disputes can lead to armed clashes. A part of it goes back to the serious differences between [pause]…well, after all the Sadrists see the situation one way, the Supreme Council [Islamic Supreme Council in Iraq] followers have their own views. Part of it goes back to the w ay the previous regime treated people. And the regime's injection of violence into society. So you've got a society that has been brought up with war and conflict and confronting enemies. Where the use of force and strength are encouraged- so the violence increases.

Are you closer with the Sadrists or the Supreme Council?
The Islamic Republic, in general, has ties with all sides- with Sunnis, Shias, Kurds, Arabs. For us, there really isn't a big difference who comes to power. It's more important that whoever comes to power can solve the internal problems of the country.