The Lebanon-based Hezbollah, a long-time Iranian ally, is believed to be acting as intermediary to the Palestinian groups Hamas and PIJ, which have traditionally had little contact with either Hezbollah or Tehran. In recent weeks fighting has flared in southern Lebanon between Israeli forces and Hezbollah guerrillas. Administration hawks say the attacks show that Iran remains committed to state-sponsored terrorism despite progress by reformers aligned with President Mohammed Khatami. Sources say the Iranian intelligence service, MOIS, which had stepped away from involvement with terrorists, has re-entered the fray by allowing its elite KUDZ force special teams that support terror to join in attacks.
At least one foreign power is shedding no tears over the faltering Middle East peace process. Last fall, administration sources tell TIME, Iran called leaders of the terrorist groups Hezbollah, Hamas and Palestinian Islamic Jihad to Tehran and urged them to coordinate their attacks against Israel in the hope of derailing then promising peace overtures. "They were pulling together their terrorist friends to try to destroy the process," says an administration official.