By acquiring nuclear technology, Tehran is asserting itself at the centre of an emerging locus of Shia power that includes Iraq and Lebanon and directly threatens US efforts to restructure the Middle East. Yet the sentiment surfacing from Tehran echoes that expressed by Defense Minister Mostafa Mohammad Najar: “The United States has been threatening Iran for twenty-seven years, and this is not new for us. Therefore, we are never afraid of US threats.”

At the centre of the bravado is new president Mahmoud Ahmadinejad. The former mayor of Tehran emerged from the generation who fought in the Iran-Iraq War. Americans may have forgotten their government’s support for Saddam Hussein in that eight-year conflict, but Ahmadinejad has not. A former Revolutionary Guards commando affiliated with the basij, the paramilitary defenders of the Islamic revolution who helped elect him, Ahmadinejad represents a hardline faction that opposes any rapprochement with the West. He and his followers are at odds with others in leadership positions—to say nothing of Iran’s upper classes—who see political and economic openness as the best way forward, but conflict with the West (and the international attention he is receiving) strengthens Ahmadinejad at their expense.

Within days of last summer’s presidential election, Iran forged ahead on its nuclear program. Emulating Ayatollah Khomeini, the new president laid everything on the line. Much had changed since 2003, when an apparently imminent American victory in Iraq persuaded Iran to offer a full peace deal to the US, a proposal American officials immediately rejected. It was, some now admit, a colossal mistake.

The US is currently mired in Iraq, and Iran, with the world’s third-largest oil reserves, has the capability to choke off the Strait of Hormuz, through which one-fifth of the world’s oil passes. It has strengthened its economic ties to Russia—a nation wary of US intentions in the region—and China, which recently inked its largest oil and gas deal in history with Iran. Any attack on the Islamic republic would be viewed by both nations as an attack on their national interests. It could also send oil prices into the stratosphere.

Iran’s chief nuclear negotiator, Ali Larijani, has rejected American demands that, in return for negotiations aimed at resolving the crisis over Iran’s nuclear activities, Iran suspend uranium enrichment and reprocessing—conditions that add up to forfeiting Iran’s main bargaining chip before even sitting down to the table. His country, Larijani insists, is acting within its rights in pursuing nuclear power but is willing to talk if plans for sanctions and regime change are set aside and security guarantees are proffered. The United States is determined to topple his government whether or not the crisis is resolved, he has said. “They want to set fire to the region.”

Lacking verifiable intelligence on any nuclear weapons program, and the experience of Iraq’s non-existent wmds still fresh in their minds, US civilian and military leaders are deeply divided over the next move. Vice President Dick Cheney and Defense Secretary Donald Rumsfeld have been leading the charge to war, reports the New Yorker’s Seymour Hersh, while many military leaders are cautioning against it.

Ahmadinejad, meanwhile, appears at ease amid the high-stakes diplomacy. The cards, he believes, are ultimately in Iran’s hand.

At bootleg dvd shops around the country, a film called The Crimes of Saddam is a bestseller, as is Uday Hussein’s home wedding video, a kitsch souvenir of how the mighty have fallen. Iranians are glad their arch-enemy Saddam Hussein has been ousted but they are well aware that it was in Iran, not Iraq, that the US embarked on its first Middle Eastern regime change. In 1953, the cia (with British involvement) overthrew Iran’s first democratically elected prime minister, Mohammad Mossadegh, after his parliament voted to nationalize Iran’s oil industry.

To find the Islamic republic’s “official” view of the United States, I visited the former US embassy in Tehran, now formally referred to as the Den of Spies. In 1979, a group of students loyal to Ayatollah Khomeini stormed the embassy and took its staff hostage. They claimed to have feared a reprisal of 1953, when the US reinstalled the Shah and trained his notorious secret police, whose repressive tactics led to the popular revolution. Inside the embassy is an exhibition called “American Democracy Fair.” Amid a phantasmagoria of satirical sculptures and caricature art pillorying US and Israeli foreign policy are rooms filled with antiquated James Bond—style equipment, relics from a previous era of US espionage. I passed by decoder devices, a soundproof meeting room, and document shredders. Hundreds of pages of shredded documents revealing American machinations have been meticulously reconstructed and sell on CD at the bookstore next door.

In the garden outside the embassy, the husk of a helicopter—from the failed US mission to rescue the fifty-two American hostages imprisoned here for 444 days—serves as an art installation, and the surrounding trees are adorned with signs that read “Down With USA.” Indeed, all of the signs seemed to be in English, which made sense when I realized that the only visitors are Western diplomats or journalists. Iranians clearly aren’t the target of this particular message. But do they agree with this view