This is a partial transcript from "The Journal Editorial Report," March 4, 2006, that was edited for clarity.

PAUL GIGOT, HOST: As Iraqis continue to deal with the deadly fallout from last week's bombing of Askariyah Shrine in Samarra, the role of neighboring Iran in fueling the insurgency is becoming clearer.

My guest this week says Iran has, in fact, gained the upper hand in Iraq, leaving him increasingly concerned with Tehran's long-term influence there.

Michael Ruben is a resident scholar at the American Enterprise Institute and editor of "Middle East Quarterly."

Michael, welcome.

MICHAEL RUBEN, SCHOLAR, AMERICAN ENTERPRISE INSTITUTE: Thanks for having me.

GIGOT: Why don't you describe for us how you think Iran is getting the upper hand in Iraq right now.

RUBEN: Well, people forget that Iran isn't the status quo power, and export of the revolution is a pillar of its ideology. They have a well- worn playbook, which they've used in southern Lebanon in promoting Hezbollah. And in Iraq, play by play, politically, economically and through information warfare, they're taking pages out of the same playbook.

GIGOT: Well, the Americans certainly know that playbook. We saw what happened in Lebanon. How have we let that happen in Iraq, which is so critical to American interests now?

RUBEN: Well, what Iran has done is use these unofficial non- governmental organizations. For example, one is called the Shaheed al-Midrob (ph) organization. Basically what they do is they hand out bags of cash in the middle of the night. We're not doing anything to shut that down.

At the same time, they're funneling in arms and money through cutouts and through other organizations, not only to Shia insurgents, but also to Sunni insurgents as well.

GIGOT: Now, we keep hearing — I've certainly heard it many times — that the Shiites in Iraq are not Persians. They're Arabs. And they're Iraqi patriots. And they're not going to subject to this kind of influence from Iran. So is that not the case?

RUBEN: You're absolutely right there. There's a huge difference between Iraqi Shiites and Persian Shiites — Iranian Shiites. The difference is, though, that the Iranian Revolutionary Guard have trained Iraqi militias. And some of these Iraqi Shia militias, which are trained by Iran, are trying to impose on Iraqis, by force of arms, what they know they can't win through the hearts and minds.

GIGOT: All right, so what can the United States do about this if we want to stop this influence?

RUBEN: Well, we're faced with the same sort of operation in Bosnia where the Iranian Revolutionary Guards were trying to infiltrate in and...

GIGOT: This was in the 1990s?

RUBEN: In 1992. And help Muslim extremists. What we did then was actually roll up some of the Revolutionary Guards, intercept them.

Now, there's always a debate in Washington when this happens. The CIA says, "No, no, no. We shouldn't do anything. We should follow them and see what they're doing and can learn from it." The State Department says, "No, no, no. Don't do anything because they might then take revenge on us." And the Defense Department says, "They're killing our guys. We've got to do it."

In Bosnia, we did it. We intercepted a 747 filled with arms, men and money. In Iraq, we've been afraid to.

Bosnia's a better place because of it. Iraq, we're still having trouble.

GIGOT: Is that going to require military action against some of these militias. And can we now, given as to how much the militias have grown, the Badr Corp and the Muqtada al-Sadr, the rebel cleric's army. Can we roll those up?

RUBEN: The first thing we've got to do is follow the money and intercept some of the arms trails from Iran.

Second of all, if Revolutionary Guard trainers are coming in, we've got to arrest them and not be afraid of it. We've got to expose what they're doing.

Let me give you an example. Everyone knows Zalmay Khalilzad, the U.S. ambassador.

GIGOT: Right.

RUBEN: He's a household name. How many people know Hassan Kazemi Qomi? He's Iran's charge d'affairs. But he's not a diplomat. He's actually a member something called the Qods Force, which is a unit of Iran's Revolutionary Guards, dedicated to export of revolution.

And before his job Iraq, he was Iran's chief liaison to Hezbollah in Lebanon.

GIGOT: I bet you there aren't a half a dozen members of the Press Corp who really know that. Certainly, I don't read that in the American press at all.

RUBEN: Well, the U.S. Press Corp should be a little bit less self- centered. Stop looking just at the Americans in the Green Zone. Look at the whole operation. Because the fact of the matter is, what's going on in Iraq, it's not just us and the Iraqis. All the neighbors are involved. And a good inquisitive journalist would start looking around and seeing.

When I lived in Iraq, often times I would live without security. I would just stay over night, if I needed to talk to an Iraqi politician, in their house. In the middle of the night, the Iranian politicians, the Iranian journalists, the Iranian officials would come to visit them. This was not being seen by U.S. diplomats and many U.S. journalists aren't allowed to go out after dark.

GIGOT: Although, it's very dangerous now to do that. I mean, you have had journalists kidnapped. So I mean, it's a lot tougher to do it now than when you were in Iraq back in 2003. You agree to that?

RUBEN: Oh, I certainly agree to that. But the fact of the matter is, this is another question. It's a lot more dangerous for us now. But what are the Iranians doing? Do they have an embassy? Do they have a Green Zone? How are they operating?

And likewise, in shutting them down, it's not just a matter of having a strategy to shut our adversaries down, but also to make our work a little bit better.

GIGOT: Can we carry this pressure on Iran inside Iran? We know that the mullahs there are not loved by the public. Can we do anything to promote their internal contradictions — to borrow the Marxist phrase — and maybe have them ease up in Iraq?

RUBEN: Oh, I think most certainly we can. And we should.

Now, what Iran is going to try to do is rally its own people around the flag, if we do anything. However, we could follow the Gdansk model, what worked in solidarity in Poland in 1981, and fund independent labor unions.

And also, Iran's Achilles heel is the fact that it imports most of its gasoline. And every time its had a petrol shortage, it has actually led to urban protests and riots within two or three days. We could really apply pressure to Iran because, they might have a lot of natural gas, but they don't have the refinery capability.

GIGOT: Michael Ruben, excellent suggestions. I hope somebody in the U.S. government is listening to you. Thank you for coming.

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