LDT: "The irony of the foreign terrorist listing is extraordinary."

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KITTY PILGRIM: As we reported, it remains unclear whether any change in U.S. policy will stop Iran's meddling in Iraq. Now, we have solved the audio problems with Michael Ware's report.

And Michael told me what impact, if any, a shift in U.S. policy would have on Iran's behavior.


MICHAEL WARE, CNN CORRESPONDENT: Oh, this is such a futile gesture, it's beyond the pale.

It will have absolutely no impact whatsoever on the steady stream of weapons, roadside bombs, all of which are killing American solders from the hands of Iranian-backed Shia militia, nor will it stop the training camps in Iran, which are preparing these Iraqis to reenter Iraq and to attack coalition forces. This is going to be nothing. It's less than a slap on the wrist.

PILGRIM: How prevalent are these explosive devices that are supplied by the Iranians? We hear from General Odierno that there's a surge in supplying arms and training and equipment to insurgents in Iraq. How prevalent is it? How apparent is it to you as a reporter in Iraq that this is going on?

WARE: Oh, look, it's palpable. In fact there's an Iranian surge which is matching, if not outstripping, the American surge. Last month was a record high for the number of EFP explosive devices. That's explosively formed projectiles. This is the most deadliest roadside bomb being used here in the war in Iraq.

And where is it coming from? It's coming from Iran. Let's have a look at one quick thing. A couple of months ago there was a historic first meeting between American and Iranian diplomats. Foremost on the agenda was America complaining about the supply of these bombs. Take a wild guess what happened after that meeting? There was a spike in the number of attacks from these bombs.

Essentially, the Iranians are seeing that the Americans, by meeting with them, by threatening to put them on the foreign terrorist organization list, must be hurting. So, let's press our advantage and keep it going.

And the irony, Kitty, of the foreign terrorist listing is extraordinary. If this happens, we will have the official military unit of the Iranian regime listed as a terrorist organization by the U.S. at the same time the Iranian armed opposition group, an ally of the U.S., will also will be on the same list as a terrorist organization. It's really quite an extraordinary policy.

PILGRIM: Where, Michael, are we seeing sort of the upsurge in activity that is believed to be supported by Iran? Is that in areas where U.S. troops are based, or is it outside of those areas?

WARE: Well, it's in both, Kitty. Clearly, we are seeing it here in the capital Baghdad itself. There are EFPs killing American solders in the streets of this city.

And let's be aware, when one of these devices hits your Humvee, chances are, no one in that Humvee will survive. That's just a grim reality. And, of course, we are seeing these devices used with great effects against the Brits down in the south, so much so, in a combination with these bombs and relentless mortar and rocket fire, the Brits have all but surrendered the southern capital of Basra.

And let's not forget, Iran's proxies, friends and allies own southern Iraq, not America, not the coalition and not the so-called government of Iraq here in Baghdad.

PILGRIM: Michael Ware, you paint a sobering picture. Thanks very much for your analysis this evening, Michael Ware.

WARE: Thank you, Kitty.