TEHRAN (Reuters) - Iran is defiant in a row with the West over its disputed atomic plans but may be seeking to ease tension with the United States by trying to restrain Shi’ite militias in Iraq and restricting arms crossing the border.

Iran's President Mahmoud Ahmadinejad (L), Gholamhossein Nozari, candidate for Oil Minister (C), and Aliakbar Mehrabian, candidate for Industries Minister, attend a parliament session in Tehran, November 14, 2007. REUTERS/Raheb Homavandi

U.S. officials, who accuse predominantly Shi’ite Muslim Iran of stirring up instability in its neighbor, appear to have softened their language in the past few weeks and pointed to a decline in attacks in Iraq by groups using Iranian munitions.

Some analysts say this may show Iran’s desire to tone down a war of words about Tehran’s nuclear goals. Washington says Iran is seeking to build bombs and that, if the country succeeds, it could spark World War Three. Iran says its aims are peaceful.

“For both sides, there is some logic in at least trying to reduce tension,” said one Iranian political analyst. “For both sides, the prospect of confrontation is dangerous.”

Iraq’s foreign minister, Hoshiyar Zebari, said last week Iran had helped “rein in” militias blamed for fuelling violence.

Tehran may be trying to show goodwill at the same time as it underlines its ability to cause trouble again if pushed, said security expert Mustafa Alani.

“It is (aiming) to prove the size and weight of Iranian influence in Iraq,” said Alani, who is based in Dubai.

But analysts said it was difficult to assess Iran’s motives and the extent of its ability to shape developments in Iraq, where many majority Shi’ites may feel more loyalty towards their own country than Tehran, despite close religious ties.

FEWER ATTACKS

Iran has consistently dismissed accusations it is arming and training allied groups in Iraq and says the violence there is due to the presence of U.S. forces, which it wants withdrawn.

“I don’t think Iran has as strong influence in Iraq as the Americans want to show, but they do have influence,” said one European diplomat in Tehran, who was skeptical that Iran had changed tack over Iraq.

U.S. officials have attributed falls in U.S. military and Iraqi civilian casualties in the past two months to a “surge” of 30,000 extra U.S. troops and tribal Sunni Arab sheikhs organizing supporters into local police units.

They have also noted a sharp drop in mortar attacks on Baghdad’s heavily fortified Green Zone last month. Many of those have been blamed on Shi’ite militias using Iranian-made weapons.

Another Western diplomat in Tehran said Iran appeared to be curbing the flow of weapons to Iraq, a policy which could be reversed if it felt the need, even though Iran would ultimately prefer to have a stable neighbor.

“I do see some restriction here on arms exports (to Iraq), but they could just open the border,” he said.

Alani said reduced Iranian activities in Iraq may also be a response to a successful U.S. crackdown.

The United States, which cut ties shortly after Iran’s 1979 Islamic revolution, has not ruled out military action if diplomacy fails to convince Tehran to halt its atomic work.

Iran, the world’s fourth largest oil producer, has refused to stop, saying it wants the technology to make electricity.

IRAN “SEEING SENSE”

Any lessening of tension, even if restricted to Iraq, may be welcomed by oil markets, where fears of Middle East turmoil have helped to push up prices towards $100 per barrel.

British-based defense analyst Paul Beaver suggested that Iran may be trying to lower the risk of any conflict with the United States.

“Iran has the power to make life easier in Iraq’s south and on the border, or make it worse, and it really seems from my perspective that they appear to be seeing sense,” Beaver said.

But Christopher Pang, head of the Middle East and North Africa program of the Royal United Services Institute in London, stressed internal Iraqi developments in explaining the reduction in violence.

He pointed to a ceasefire called by Moqtada al-Sadr, head of the feared Shi’ite Mehdi Army, in August and said this group had realized “it is not in their interest to foment further intra-sectarian violence.”

U.S. officials accuse Sadr of having close links with Iran.

In what some have seen as another sign of easing tension, the U.S. military last week freed nine Iranians held in Iraq, including two it accused of links to Iran’s Qods force, which handles the foreign activities of Iran’s Revolutionary Guards.

Zebari, Iraq’s foreign minister, said he believed it would “enhance confidence” in dialogue between Iran and the United States over Iraq. Both sides have indicated willingness to attend further talks after three meetings so far this year.

But in comments highlighting Washington’s deep-seated suspicions about Tehran’s aims, a U.S. general on Sunday said extensive Iranian influence in Iraq remained evident and that 20 Iranian-trained agents were still operating south of Baghdad.