Iran is now taking key roles in Iraqi reconstruction and the economy, by signing up to build billions of dollars worth of power plants, to be centred in prominently Shiite locales.
President Bush is taking offense at Iran cutting key energy deals with Iran, and has attacked prime minister Nuri al-Maliki for recent statements that Iran was not a dangerous presence in Iraq and could play a "constructive" role in bringing security to the world's terrorism capital.
From Al Jazeera :
The US president has rebuked Iraq's prime minister for speaking too favourably about Iran. "If the signal [from Nuri al-Maliki] is that Iran is constructive, I will have to have a heart-to-heart with my friend, the prime minister. Because I don't believe they are constructive," George Bush said.
Al-Maliki had thanked Iran for its "positive and constructive" work in "providing security and fighting terrorism in Iraq" on a visit to Tehran, according to the state-run Islamic Republic News Agency.
Iranian leaders told the visiting al-Maliki that they wanted Iraq's friendship and would do all they could to boost Iraqi security.
Al-Maliki's talks appeared to confirm the increasingly warm relations that have emerged between majority Shia Iraq and overwhelmingly Shia Iran following the fall of Saddam Hussein's Sunni-dominated regime.
Bush is making a habit of insulting the leaders of nations the Americans are supposed to be liberating from the clutches of Al Qaeda and terrorists.
He warned Hamid Karzai, the Afghan president, on Monday during a visit to the US presidential retreat at Camp David to be more suspicious of Iran after the Afghan leader had brushed aside US accusations that Tehran was arming the Taliban.
Iran, with a majority of Shia Muslims like Iraq, has been an important political player in Iraq since the 2003 US-led invasion. Tehran denies Washington's accusations that it is supplying weapons to fighters to fuel violence, and instead blames the US military presence.
Baghdad has urged both countries to negotiate and not fight out their differences on Iraqi soil.
That fight would appear to be already well underway.