TEHRAN (Reuters) - The United States could unleash vastly superior firepower if it attacked Iran but Tehran could strike back against its forces in Iraq and threaten oil supplies crucial to the world economy.

Speculation is growing that President George W. Bush could launch military action before he leaves office in January 2009 even though Washington says it is committed to resolving the crisis over Iran’s disputed atomic ambitions diplomatically.

“It should be a walkover militarily,” said London-based defense analyst Andrew Brookes about any U.S. attempt to knock out the Islamic Republic’s atomic installations.

“The hard bit is what comes afterwards and that is opening Pandora’s box,” said Brookes of the International Institute for Strategic Studies (IISS) think-tank.

Western powers suspect Iran is seeking to build atom bombs. Iran says its nuclear program is aimed at generating electricity so that it can export more of its oil and gas.

A former Iranian official with links to the country’s highest authority, Supreme Leader Ayatollah Ali Khamenei, suggested Tehran would respond by using allies in the region to take the fight elsewhere in the Middle East.

“If they want to play games with us, I believe in a few ways we can turn Iraq into a fiery battlefield,” he said.

“GRIEF”

Security experts voiced different opinions about the strength of Iran’s armed forces in a showdown with the United States, which they believe would involve a U.S. air campaign but not an invasion by ground forces.

The military, under an arms embargo imposed by Washington, still partly relies on fighter aircraft and hardware bought before the 1979 Islamic revolution that toppled the U.S.-backed shah, topped up with domestically produced equipment as well as imports from Russia and others.

A Western diplomat said Iranian leaders were confident U.S. aerial bombardment would not threaten their hold on power.

“A bombing campaign has never removed a government and especially not in a country like this when there is no organized opposition,” the Tehran-based diplomat said.

Iran’s confidence has grown as it watched America’s failure to get a grip on Iraq despite its overwhelming military supremacy.

Iran says it has missiles that could hit Israel and other state of the art weaponry and that the West would regret any attack, warning of a “quagmire deeper than Iraq.”

Such statements may be exaggerated and aimed at a domestic audience, but some analysts say Iran could retaliate by, for example, using speed boats to launch guerrilla-style hit-and-run attacks on oil shipping, so-called “asymmetric” warfare.

Iran, blamed for bomb attacks carried out by Shi’ite militants against U.S. interests in Beirut in the 1980s, could also resort to its old tactics, some add.

An Iranian commander last week said “martyrdom-seeking” militia would be able to disrupt Gulf transport routes.

“Iran can not win a military campaign in a conventional sense but what it can do is cause considerable amount of grief afterwards,” Brookes said.

This line of thinking was reflected in a commentary in Iranian daily Siyasat-e Ruz which said the elite Revolutionary Guards had held exercises in the “strategy of irregular combat.”

“We are confident we can defend this country ... In case of a war, Iranians will do everything that they can do,” said Iranian analyst Abbas Maleki.

“MAJOR BATTLEFIELD”

Tim Ripley, a defense analyst who works for Jane’s Defense Weekly, said Iran’s armed forces had shown resilience during their 1980s war with Iraq and the nightmare scenario for Washington would be launching a war it could then not finish.

The United States had the capability for another “shock and awe” campaign but fighting Iran would not be like the U.S.-led invasion of Iraq in 2003 and parts of the Iranian military would likely “put up a real good fight,” he said.

“If you compare like for like the Iranians may not be as good as the Americans but their leadership ... know how to use what they’ve got to really great effect,” Ripley said.

He said Iran could simply declare the Strait of Hormuz at the entrance of the Gulf a war zone to send oil prices, already nearing $100 a barrel, soaring without a shot being fired.

How to prevent any spillover effect in Iraq, where Shi’ite militants loyal to Tehran operate, is also likely to preoccupy U.S. planners in case of conflict with Iran.

The United States often accuses Iran of fomenting violence in Iraq but the Western diplomat said Tehran at the moment actually seemed to be restricting the flow of arms to Iraqi militias, a policy it could reverse if it felt threatened.

“The major battlefield is Iraq,” said Dubai-based security analyst Mustafa Alani.

One Western expert said Iran’s military was in a better state “than people give it credit for” with good technology and equipment including Russian anti-aircraft missile defense.

But Alani was less impressed. He said he did not think Iran could either prevent an American attack or strike back by, for example, shutting down the Strait of Hormuz.

“We believe there is a huge exaggeration about Iranian military capability,” Alani said. “The only problem is Iraq.”