Following a growing number of protest demonstrations in Baku, Azerbaijan's capital on the Caspian Sea, the government of President Ilham Aliyev has openly accused Tehran of interfering in its domestic affairs.
Aliyev's regime has good relations with the West and growing political, military and intelligence links with Israel.
"Just as in the Persian Gulf, Iran has an interest in exploiting any unrest or instability in Azerbaijan to increase its influence in the country," the global security consultancy Stratfor observed in a March 10 analysis.
"The increasing tempo of recent protests in Azerbaijan has given Iran an opportunity to use its substantial levers in the country -- including ties to Azerbaijani opposition parties and influence over the country's religious and educational institutions -- to pressure its small northern neighbor."
However, Stratfor concludes that "many factors -- from demographics to Russia's influence to Iran's primary interest in the Persian Gulf countries -- will ultimately make Tehran act cautiously in attempting to provoke unrest in Azerbaijan."
Nevertheless, given the tense confrontation between Iran and the United States over Tehran's contentious nuclear program, Iranian hardliners, particularly in the powerful Islamic Revolutionary Guards Corps and the intelligence establishment, are concerned that Azerbaijan could be used as a springboard for moves against the Islamic Republic.
In particular, these elements suspect Azerbaijan, a former Soviet republic whose population is 85 percent Shiite Muslim, will use its links to Shiite Iran's ethnic Azeri population to foster discord within Iran.
Baku is concerned about Tehran's political and financial support for the Islamic Party of Azerbaijan, a pro-Iranian Shiite opposition party that is banned by Aliyev's regime.
His security apparatus has cracked down heavily on this organization.
Iranian unease at Western and Israeli influence in Baku has grown amid increasingly violent unrest in the Islamic Republic's border provinces by anti-Shiite groups, primarily made up of Sunnis, which Tehran claims are backed and funded by the United States, Britain and Israel.
At the same time, Western and Israeli intelligence services have been seeking to sabotage Iran's alleged drive to acquire nuclear weapons.
The Iranians fear Israel is using its growing intelligence ties with Baku to conduct espionage and destabilization operations against the Islamic Republic, in conjunction with clandestine operations from Iraqi Kurdistan.
The Israelis say Iran and its Lebanese proxy Hezbollah are active in Azerbaijan and in 2008 plotted to blow up the Israeli Embassy in Baku to avenge the assassination of Hezbollah's iconic military chief, Imad Mughniyeh, in Damascus Feb. 12 that year.
The embassy is in the Hyatt Tower complex along with the Japanese and Thai embassies.
Two Lebanese, Najam Aladinne and Mohammed Karaki, were arrested by Azeri authorities and convicted of the bomb plot, which Baku officials said was in "the advanced stages."
Karaki was identified as a veteran of Hezbollah's external operations unit and Aladinne as an explosives expert. They traveled on Iranian passports.
Investigators said the bombing was weeks away from being carried out when the Lebanese realized they were under surveillance.
Police swooped, but a number of other Lebanese, Iranian and Azeri suspects fled by car into Iran. Karaki and Aladinne were sentenced to 15 years in prison. However, last August, the pair, along with 12 Iranians held in Baku, was reportedly released in a prisoner exchange with Tehran.
According to U.S. diplomatic cables released by WikiLeaks in December, Azerbaijan, like Israel, perceives Iran as a major security threat.
"Through its close relations with Israel, Azerbaijan gets a level of access to the quality weapons systems it needs to develop its army that it cannot obtain from the U.S. and Europe," one U.S. Embassy cable observed.
Stratfor concluded that while "Iran ultimately might be interested in the overthrow of the government in Baku … due to factors such as the sizeable Azerbaijani population in Iran and Russia's potential involvement, Tehran ultimately will be cautious in how far it goes in provoking unrest in Azerbaijan.
"Meanwhile, Iran will continue to concentrate on its true target: the countries of the Persian Gulf."