WASHINGTON – In the last year Iran has stepped up its funding, recruitment, and direction of Palestinian terrorist attacks, filling the void left by Israel’s decimation of Hamas’s leadership, according to Israeli officials in Washington.

The latest Israeli intelligence statistics disclose that the terrorist wing of Hezbollah, an organization funded and trained by Iran, is responsible for 70% of Palestinian Arab terrorism in the last year.

That figure is derived, according to one Israeli official in Washington, from the confessions of the some 7,000 Palestinian Arabs the Israelis have detained since September 2000, a network of informants in the territories, and an aggressive campaign to track terrorist finances through regional banks in Jordan and Egypt.

The spike in Iranian involvement comes as Israel has continued a campaign to assassinate leaders in the military wing of Hamas and Palestinian Islamic Jihad, groups that have in the past received some support from Iran but were largely funded by private Saudis and other Arab financiers. With Hamas and PIJ much weaker, Hezbollah-directed attacks in 2004 accounted for 27 murders of Israeli citizens, the highest total of any terrorist group in the region.

Speaking to reporters yesterday at Israel’s embassy in Washington, Ambassador Daniel Ayalon said, “There is an increased effort by Iran, mostly through their arm in the region Hezbollah, and the Revolutionary Guards in Lebanon to continue to increase the capability of Palestinian terrorist organizations.”

The ambassador added that the Iranian role is “the most significant strategic threat to any progress and peaceful dialogue.”

On Monday, the International Atomic Energy Agency announced a deal with Iran that would compel the Islamic republic to freeze its nuclear enrichment, but not dismantle its nuclear infrastructure. President Bush, in Ottawa yesterday, called Iran’s set of centrifuges and laboratories a weapons program.

“The Iranians agreed to suspend, but not terminate, their nuclear weapons program,” he said at a press conference with his Canadian counterpart, Paul Martin.

“Our position is, is that they ought to terminate their nuclear weapons program. So I viewed yesterday’s decision by the Iranians as a positive step, but it’s certainly not the final step. And it’s very important, for whatever they do, to make sure that the world is able to verify the decision they have made. And so we’ve obviously got more work to do,” President Bush said.

The increased Iranian role behind Palestinian terror could serve as a further deterrent for Israel or America to take out Iran’s nuclear facilities with military strikes, risking a potential spate of suicide bombs in retaliation.

On the other hand, the Iranian role could also be all the more reason Israel would not tolerate the mullahs acquiring nuclear weapons that would give them the ultimate military deterrent to continue their policy of terror with impunity.

In the last year Iran has also increased funding for the Tanzim, the militia associated with jailed Palestinian Arab leader Marwan Barghouti who this week threw his support behind Mahmoud Abbas in the elections that are scheduled for January 9 of next year.

The Tanzim traditionally has been funded and directed by Fatah, the party founded by Yasser Arafat. However, Israeli officials yesterday said the organization was getting the majority of its support today from Iranian-directed Hezbollah agents.

One administration official familiar with the Israeli intelligence said it was still being analyzed in Washington.

“It’s very difficult to measure the sponsorship of terrorism in terms of incidents. But it is something we are aware of,” this source said.

Iranian support for anti-Jewish terror is nothing new for the Israelis. On January 3, 2002, the Israeli navy seized the Karine A, a vessel under the flag of Iran that contained 50 tons of explosives destined for the Palestinian Authority.

The incident and the failure of Arafat to take responsibility for it, contributed greatly to the president’s decision to pursue reform among the Palestinian leadership instead of a new peace process.

As the Bush administration considers Iran policy options for the second term, one issue gaining currency among the allies has been to beef up support for Iranian democrats in the country.

This move would be done with the hope that the kind of velvet revolution now seizing the Ukraine could oust ayatollahs in Tehran.

Prime Minister Blair, whose government helped negotiate the Iran nuclear deal, said yesterday, “I sympathize with people in Iran and elsewhere who want the same freedoms that we want, and I have no doubt at all that in the end the best way to run any country is through democracy.”

The New York Sun reported last week that the State Department’s Middle East Partnership Initiative is considering a plan to at least query Iranian democracy and human rights organizations if they could accept American aid.

National Security Adviser Condoleezza Rice earlier this week told a group of American Jewish leaders that she was also open to this idea, according to two people at the White House meeting.