With the creeping possibility of a nuclear breakout, its vigorous sponsorship of international terrorism and its escalating intervention next door in Iraq, the Islamic Republic of Iran is a triple threat - at least - to international security and America's Middle Eastern interests. Indeed, perhaps no country fits the definition of rogue state as well as Iran does. Making matters worse, Iran's confidence and clout in the region - and beyond - are indubitably on the rise.

But that is only the beginning. Shiite Persian Iran is not content with being just an inconsequential pariah. Iran has grand ambitions. Tehran wants to be the predominant state in the Middle East, replacing the U.S. as the region's power broker and lording over its Sunni Arab neighbors. With the fall of its most fearsome competitors for regional pre-eminence - Iraq's Saddam Hussein and Afghanistan's Taliban - Iran is unabashedly reasserting itself on the international stage.

Buoyed by high energy prices, emboldened by continuing American challenges in Iraq and Afghanistan, encouraged by consistent, unimpeded progress in its nuclear program and the increased influence of its extremist allies - Hamas and Hezbollah - Iran has its eye on becoming the regional hegemony. If unchecked, Tehran may pull it off.

NUKES 'R' US

While Tehran insists its nuclear program is for peaceful, civilian power generation, analysts are deeply skeptical. All indicators - from the lack of the program's transparency to its ties to the prodigious Pakistani proliferator, A.Q. Khan, to its burgeoning ballistic missile program - point in the direction of nuclear weapons, not nuclear power.

Moreover, Iran's continued defiance of U.N. Security Council resolutions calling on it to cease the enrichment of uranium - key to both producing nuclear reactor fuel and fissile material for nuclear weapons - has not inspired confidence in Iran's so-called "peaceful intentions."

The U.N.'s nuclear watchdog, the International Atomic Energy Agency (IAEA), says Iran could be involved in industrial-scale uranium enrichment in as little as six months. Tehran, naturally, insists it needs access to the full nuclear fuel cycle, and will only enrich uranium to 4 percent - the level needed for nuclear reactor fuel. (Fissile material used for weapons - highly enriched uranium - is enriched to 90 percent.)

According to the latest intelligence estimates, if unfettered, Iran could be a nuclear weapons state by 2015. A reasonable estimate? Perhaps. But with limited visibility into Iran's nuclear program, it is at best a "guesstimate." Further, it probably also does not take into account the possibility of external assistance from the former Soviet Union or now-nuclear North Korea, with whom Iran has budding ballistic missile ties.

Similarly troubling is the question of whether Iran, as a nuclear weapons state, will involve itself in the dreaded "secondary proliferation," passing its nuclear know-how on to others. Could Tehran's de facto ally, Syria, be the recipient of Iran's nuclear largesse? Iranian President Mahmoud Ahmadinejad vowed at the U.N. to share Iran's nuclear technology with other Muslim states. Another question: Would Iran put other states under its nuclear umbrella?

These scenarios do not even take into account the regional implications of an Iranian nuclear breakout. In recent months, at least six Middle Eastern Arab states have declared their intention to the IAEA to pursue "peaceful" nuclear energy programs. Suspiciously, one of the six, Saudi Arabia, sits atop 25 percent of the world's known oil reserves. With only 20 million people, Riyadh hardly needs nuclear power. Moreover, the advent of an Iranian bomb would also shoot another hole in the already-leaky Nuclear Non-Proliferation Treaty, undermining international efforts to limit access to the once exclusive nuclear weapons club.

To get conventional - or nuclear - weapons on target, Iran is developing a prodigious ballistic-missile arsenal, now the Middle East's biggest. Based on the North Korean No-Dong ballistic missile, its Shahab-3 missile can already reach all of the Middle East and Turkey. Tehran is working on another version, the Shahab-4, that can strike into Europe. A longer-range program is also on the drawing board, making Iran's recent claims of a space program set off alarm bells about an intercontinental ballistic missile, which could reach the U.S.

TIES TO TERRORISM

According to the U.S. State Department, Iran continues to be the world's most active state sponsor of terrorism. At the request of senior Iranian leadership, Iran's Ministry of Intelligence and Security (MOIS) and Islamic Revolutionary Guard Corps (IRGC) support Palestinian terrorist groups such as Hamas, Palestinian Islamic Jihad, the al Aqsa Martyrs Brigade and the Popular Front for the Liberation of Palestine-General Command with funding, training and weapons.

Hezbollah - a Lebanese Shiite terrorist group - is a particular favorite. In fact, Iran established Hezbollah to parry Israel's 1982 invasion of Lebanon. Tehran may fund Hezbollah to the tune of $100 million per year. Last summer, Tehran's military support for Hezbollah was evident. Iran likely gave Hezbollah the green light to ambush an Israeli patrol and kidnap soldiers, which ultimately kicked off the monthlong conflict.

In the ensuing days, Hezbollah indiscriminately fired as many as 10,000 Iran-supplied rockets and missiles into Israel. In addition, many were stunned when a C-802 cruise missile struck an Israeli naval vessel off the coast of Lebanon. While the shooter was never identified, the Chinese C-802 is in Iran's inventory. It could have been fired by either Hezbollah or the IRGC.

Today, Hezbollah, with Iranian and Syrian support, is threatening to topple Lebanon's democratically elected government unless it is given additional cabinet seats - potentially giving it veto power over Beirut's decisions. Iran would love to add Lebanon to Syria as a client state in its effort to form an arc of Iranian influence across the region.

Iran has made a number of not-so-veiled threats that it would deploy its irregular forces and terrorist allies against the U.S. and American interests, if necessary. This is likely not an idle threat. American blood is already on the hands of Iran and its terrorist proxies as a result of the 1983 Beirut Marine barracks attack and the 1996 Khobar Towers bombing in Saudi Arabia, and in Iraq today. It is almost without question that Tehran sees its ability to hold U.S. interests at risk across the globe - including in the U.S. - as leverage against American military action over its nuclear program or meddling in Iraq.

Perhaps the most frightening scenario is that Iran might transfer weapons of mass destruction capability to a terrorist ally. While this is risky behavior, it is a possibility. Iran could transfer nuclear capability to a Hezbollah-dominated government in Lebanon, or a Hamas-led Palestinian Authority, significantly increasing the threat to Israeli security. Osama bin Laden has not been shy about his desire for WMD or al-Qaida's readiness to use them. The insurgency's recent use of chlorine gas in Iraq is evidence of a terrorist group's willingness to employ WMD.

IRAN IN IRAQ

Despite its insistence that it seeks stability in Iraq, Tehran is providing funding, weapons and safe passage into Iraq for Shiite militias and other militants. Hezbollah is helping with training. The IRGC, MOIS and the shadowy Quds Force are supplying explosively formed penetrators, rocket-propelled grenades, .50-caliber sniper rifles and other weapons to Shiite militias, resulting in nearly 200 U.S. deaths and 700 wounded over the last six months, according to the U.S. military.

Iran is also using "soft power" such as radio, television and the print media to shape Iraqi public opinion, including funding friendly Shiite political parties and promoting pro-Iranian officials in the Iraq government. As with Beirut and Damascus, Tehran would love to bring Baghdad under its political sway, allowing Iran to dominate the heart of the Middle East.

To implement its hegemonic designs, Iran must become the dominant military force in the Persian Gulf. Nuclear weapons only go so far. Iran's conventional forces are large in contrast with other regional militaries, but have limited capability, especially compared with U.S. forces. Most of its equipment is worn, even obsolete, but Tehran has used windfall profits from oil and natural gas exports to modernize its conventional armed forces through equipment upgrades, procurement and a robust military-exercise program. For instance, spending nearly $1 billion, Iran is purchasing the highly capable Russian short-range air defense system, the SA-15 (Tor-M1). But even with ongoing modernization efforts, limitations in command and control, intelligence, electronic warfare, logistics and joint operations will undermine Tehran's dreams of hegemony - at least for the short term.

Iran has also flexed its muscles through military exercises, especially over the last year. It is clear Iran has no intention of taking the U.S. head-on in a military dust-up. Tehran will use an asymmetric strategy, including land- and sea-based ballistic and cruise missiles, missile-equipped patrol boats and mines. Irregular warfare, including suicide attacks, is a certainty. In fact, Iranian exercises have been so aggressive that American commanders are worried an incident could spark an engagement in the Persian Gulf as Tehran edges its war games into busy gulf sea lanes.

Iran has talked about wielding the oil weapon, too, closing the Strait of Hormuz, through which 40 percent of the world's oil flows. But, in practice, the threat rings a bit hollow. Sure, Iran could slow maritime traffic by mining the six-mile-wide sea lanes of the strait or by attacking international shipping with, for instance, its Kilo-class diesel submarines or Seersucker anti-ship missiles. Expending a large number of assets, it could possibly close the strait to navigation for a few days, a week tops. But there are trade-offs. Iran would certainly unsettle global oil markets and intimidate its oil-producing neighbors. But if it closes the strait, it would have a difficult time getting its own oil and gas to market, hamstringing its fragile economy.

Diplomatic efforts over the past couple of years have yielded little to nothing in terms of moderating Iranian behavior, especially its nuclear program. While punitive economic sanctions would pummel the Iranian economy, already beset by high unemployment and inflation, permanent U.N. Security Council members China and Russia are reluctant to get tough. Russia is building Iran's first nuclear reactor at Bushehr for $1 billion; China is investing $100 billion in Iranian oil and gas over the next 25 years.

NUCLEAR CAT-AND-MOUSE

So what is the prognosis for the near future? Iran is very likely to continue to play a cat-and-mouse game on its nuclear program despite international obligations and pressure. Tehran will continue to flout U.N. resolutions while offering up the possibility of negotiations to end the crisis, which some, especially the Europeans, find attractive. Iran will also continue its involvement in Iraq, being careful to keep its fingerprints off events while working to bring Iraq into its sphere of influence and hastening along an ignominious U.S. defeat and withdrawal.

But don't forget Israel. Even with the current government's weakened state, Israel could decide to take things into its own hands. A strike against Iranian nuclear facilities would be more difficult than the one against Iraq's Osirak reactor in 1981. But an attack against key Iranian nuclear facilities could set the program back years. Iran's Arab neighbors would vociferously protest Israeli aggression for public consumption, but privately breathe a large sigh of relief. Unfortunately, a strike might not end Iran's nuclear ambitions, and there remains the possibility of a wider Israeli-Iranian war, involving Iranian missile and terrorist attacks on Israel.

So is war with Iran inevitable? War is never inevitable. But while conflict with Iran is not a certainty, misperception and miscalculation that lead to war are always a possibility. Dealing with Tehran is nettlesome. This means that while running out other diplomatic and economic sanction options, Washington would be wise to build a regional coalition to contain and deter Iran, and look for opportunities to roll back Iranian influence wherever possible - while keeping the military option squarely on the table.

Peter Brookes is a Heritage Foundation senior fellow and a former deputy assistant secretary of defense who also served in the Navy, with the CIA and on Capitol Hill.