An Iranian Foreign Ministry spokesman, Hamid Reza-Assefi, described the accusation as a lie and an attempt to conceal Britain's own role in fomenting unrest in Iraq.
But today, British Prime Minister Tony Blair reiterated the British complaint, although he held back from explicitly accusing the Iranian government.
"What is clear is that there have been new explosive devices used, not just against British troops, but elsewhere in Iraq. The particular nature of those devices lead us either to Iranian elements or to Hizballah, because they are similar to devices used by Hizballah that is funded and supported by Iran. However, we cannot be sure of this at the present time," Blair said.
According to the British official who first made the charges public, the British ambassador in Baghdad has complained repeatedly to his Iranian counterpart that there is a clear link between the bombs and devices used by Hizballah in southern Lebanon, which has close ties with Iran's Islamic Revolution Guards Corps.
So why has Britain chosen this moment to abandon quiet diplomacy in favor of public accusations?
Charles Langton is a defense specialist at the Institute of International Strategic Studies in London.
"I think we need to look at this against the background of two aspects of the Middle East at the moment. The first is the upcoming referendum on the constitution in Iraq, which is fraught with the possibility of insurgency on the one side, and the Shi'ite militias on the other side increasing their militancy. The second thing is the issue of the Iranian nuclear question and whether or not it is going to be referred to the Security Council. And of course, Britain plays a big part in that because it is a member of the so-called EU-3," Langton said.
The EU-3 is the team of Germany, France, and Britain previously engaged in negotiating with Iran over its nuclear program.
According to this argument, Iran has targeted the British troops in an attempt to soften Britain's objections to Iran's efforts to master nuclear fuel technology. With relations now at a low ebb, however, the British feel they have nothing to lose by going public on the Iran's involvement in southern Iraq.
British troops in the region are facing a new and sophisticated type of armor-piercing projectile, which is triggered when an infrared beam is crossed, and against which they have no effective defense.
The British government official said the device had been developed by Hizballah and was being used in southern Iraq by a breakaway faction of the radical Shi'a cleric Muqtada al-Sadr's Mehdi Army. The leader of the group, Sheikh Ahmed al-Fartusi, has been arrested by British forces.
Ali Rezah Nurizadeh, a regional expert at the Centre for Arab-Iranian Studies in London, says Iranian infiltration of Iraq, especially southern Iraq, is extensive.
"There are hundreds of Shi'ite members of Badr Brigades [loyal to the Supreme Council for the Islamic Revolution in Iraq], as well as other groups who receive training in Iran -- not only military training, but other training by the Ministry of the Interior in Iran, by the security forces. We even have people of the rank of colonel in the Iraqi police who were trained by the Iranians and who were members of groups directed and run by the Revolutionary Guards," Nurizadeh said.
Nurizadeh believes the Iranians want to demonstrate to the British just how dependent they are on Tehran's goodwill in southern Iraq, and to use that as a lever in international politics.
"The Iranians showed to the British that they have men, they have resources and they can fight them, they can damage their reputation and they can kill their troops and they can kidnap their troops. And I think this is the plan and then bargaining on them and trying to influence the British policy towards Iran in international atomic energy," Nurizadeh said.
The British, though, appear to believe that Iran's real aim is to tie down coalition forces in Iraq -- to drag them into a quagmire from which they will only escape with the greatest difficulty. Which is why, the British claim, Iran is supplying not just Shi'as in Iraq but Sunnis as well.
Britain's position towards Iran has hardened considerably since the failure of the EU-3 to persuade Iran to abandon uranium conversion program. It may well presage an even tougher response from the United States.
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