BRUSSELS, 29 May 2003 — If you liked the Iraq crisis, you’ll love the coming trans-Atlantic clash over Iran.

European Union officials say they are bracing for the next tug-of-war in strained ties with Washington over whether to isolate or engage with the Islamic republic.

“This is going to be an important test,” said Greek Foreign Minister George Papandreou, whose country holds the rotating EU presidency. “It will bring out the dilemmas we’ve had recently on Iraq.”

The United States has no official ties with Iran and has branded it part of an “Axis of Evil”, accused of developing nuclear weapons, aiding terrorism and violating human rights.

On Tuesday, Defense Secretary Donald Rumsfeld stepped up charges that Iran was harboring wanted leaders of the Al-Qaeda. Insiders say he is pressing for a US policy shift to support “regime change” in Tehran.

The EU, on the other hand, is negotiating a trade and cooperation agreement with Iran under a policy dubbed “conditional dialogue”, which is meant to link improved ties with parallel progress on political issues.

Meanwhile, Iran has publicly acknowledged having a much more extensive nuclear program, including uranium enrichment, than it previously declared, though it denies seeking atomic weapons. “When we raise our concerns about human rights, weapons of mass destruction and support for terrorist groups opposed to the Middle East peace process, they talk softly but they have made few concessions,” one EU official said.

The Europeans have urged Tehran to sign up to tougher UN nuclear safeguards, but it has deflected such suggestions, noting that even the United States and some EU states do not accept such intrusive inspections of their own facilities.

“The problem is that the people we talk to — President (Mohammad) Khatami and Foreign Minister (Kamal) Kharrazi — don’t really run the country. Their powers are limited,” the EU official said.

Hard-line clerics headed by supreme leader Ayatollah Ali Khamenei control most of the levers of power, including the judiciary, the security forces and an un-elected council that can veto legislation on Islamic grounds. Nevertheless, the EU is not ready to give up on Khatami and his reformists, who have struggled since 1997 to democratize and modernize Iran against entrenched conservative resistance.

“The perception that some have in Washington that this place is ripe for revolution is just plain wrong,” said a European diplomat in Tehran.

British Prime Minister Tony Blair, President George W. Bush’s closest ally, has invested political capital in building ties with Iran and is encouraging Washington to give dialogue a chance, aides say.

Unlike over Iraq, Britain and France are on the same side for the moment in backing cautious engagement with Iran. Both also have oil investments in the country of 65 million people. Germany, Tehran’s biggest Western trade partner, backs the dialogue policy more enthusiastically, as does Italy.

Brussels officials are hoping the 15-nation EU’s unity will not be blown apart by the first gust of wind from the Pentagon. But that is far from sure.

“Iran could be the next big issue to split both the trans-Atlantic alliance and the European Union,” predicts Steven Everts, a specialist on US-EU relations at London’s Center for European Reform.