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SIOUX FALLS, South Dakota — Vladimir Putin is on a roll. Last month, he made it clear that he intends to become prime minister — and keep the reigns of power in the Kremlin — when his second presidential term ends in March of 2008. Last week, in the midst of a bravura “mini-summit” with German Chancellor Angela Merkel, Mr. Putin wowed the fawning European press by shrugging off a carefully-leaked rumor of an alleged assassination attempt and by speaking fluent German — a language he mastered as a KGB officer in Dresden during the Cold War. All this apparently took U.S. diplomats and intelligence agencies by surprise. But wait, there’s more.

While in Germany, the macho Mr. Putin baldly told reporters, and therefore all those who might contemplate military action against Tehran, “Threatening someone, in this case the Iranian leadership and the Iranian people will lead nowhere. They are not afraid, believe me.” And just to make sure everyone got his point, two days later he went to Tehran for a “Caspian littoral” summit and reiterated to the world that Russia would block any moves to stop Iran’s nuclear program. And to ice Mr. Putin’s cake, reputable polls show that more than 70 percent of Russians approve of his leadership. Officials in Washington, London and Paris don’t seem to be worried — but they should be.

Mr. Putin’s Tehran gambit is much more than a rhetorical affront to the Bush administration’s efforts to keep the Iranians from acquiring nuclear weapons. After meetings with Mahmoud Ahmadinejad, the Russian president said, “Iran and Russia are now cooperating on a wide range of issues such as aviation industry and Russia will continue its contribution to Iran’s peaceful nuclear program.” Most of the U.S. and European media “sound-bites” focused on the “nuclear” issue. Some news reports cogently noted that the Russian-built Bushehr light water nuclear reactor is capable of producing weapon’s grade plutonium — but ignored the arrays of gas centrifuges Iran is using to assure a dual-track approach to building nuclear weapons. Almost no one noticed that the new strategic synergy between Moscow and Tehran goes well beyond Bushehr.

First, with petroleum soon to be at $100 per barrel or higher, both Iran and Russia have a financial interest in controlling how Caspian Sea oil makes its way to market. Messer's Putin and Ahmadinejad have now made it clear that they will dictate the terms by which Caspian crude will flow to the highest bidder.

Second, Moscow and Tehran share a strategic interest in bad outcomes for the U.S. in Iraq. An American collapse in Mesopotamia gives Iran the kind of regional hegemony that Persians have sought for centuries. And a precipitous U.S. withdrawal from Iraq would confirm Moscow’s assertion that the U.S. is an unreliable partner — thus undermining NATO’s eastward expansion.

Finally — if the joint statement issued after the so-called Caspian littoral summit is to be believed, Tehran and Moscow have now coerced their neighbors into what amounts to a collective security agreement. According to Mr. Putin, “We are saying that no Caspian nation should offer its territory to third powers for use of force or military aggression against any Caspian state.” Just in case anyone missed the point, Mr. Ahmadinejad added, “The Caspian Sea is an inland sea and it only belongs to the Caspian states, therefore only they are entitled to have their ships and military forces here.” So much for any NATO plans to use air bases in Azerbaijan to launch, recover or re-fuel aircraft striking Iranian nuclear weapons facilities.

None of this was forecast by U.S. or allied intelligence agencies — nor do we know what Presidents Putin and Ahmadinejad discussed in private. We can only hope that Mr. Putin’s “aviation industry” reference doesn’t mean that Iran is about to acquire hundreds of Bal-E anti-shipping missiles or that Tehran is planning to replace its ancient F-14s with a fleet of new Russian-built Su-27s. All we know for certain is that Iran, awash in petro-dollars, can easily afford both and that Moscow is in a selling mood.

Importantly, Putin the puppet-master timed all of this to coincide with meetings among U.S. Secretary of State Condoleezza Rice, Defense Secretary Robert Gates and their Russian counterparts in Moscow. According to our State Department, the ostensible purpose of these meetings were to “review security issues of mutual concern in Europe.”

To underscore how much we have “misunderestimated” Mr. Putin, President Bush, when asked by reporters what all this might mean to U.S. interests, responded, “I’m looking forward to getting President Putin’s read out from the meeting.” So much for U.S. intelligence and diplomacy.

E-mail Oliver North

Oliver North is a nationally syndicated columnist, the host of “War Stories” on the FOX News Channel and the founder of Freedom Alliance, a foundation that provides support for the troops and scholarships to the dependents of servicemen killed in the line of duty.

Lt Col Oliver L. North (ret.) serves as host of the Fox News Channel documentary series "War Stories with Oliver North." From 1983 to 1986, he served as the U.S. government's counterterrorism coordinator on the National Security Council staff. North is the founder of Freedom Alliance, an organization providing college scholarships to the children of military personnel killed in the line of duty and author of the new nationwide bestseller, "Counterfeit Lies," a novel about how Iran is acquiring nuclear weapons and the means of delivering them. Click here for more information on Oliver North