Adrian Hamilton: Of course Iran wants to meddle in its region

When a friend of mine from university joined the Foreign Office, his first posting was to Yemen where one of his duties was security. Opening his instructions for what to do in case of rioters attacking the embassy building, he was told to go to the safe and get out the bag of gold coins kept there. If the rioters broke through he was to stand at the top of the stairs and toss the coins down to the crowd below and then make his escape.

Cash has always been the currency of the East. So it's hardly a surprise that Iran was found bringing bags of it to President Karzai's office in Afghanistan, nor that the world's best-dressed leader should admit it with a smile when caught out.

What is a little more confusing is the contortion with which the US government has reacted to the news. Since, as Karzai cheerfully revealed, Washington pays him in precisely the same manner, the State Department is hardly in a position to denounce Tehran's act. On the other hand, it is terribly anxious to demonise the country and paint it as a supporter of terror throughout the region and to keep it from having any influence in Afghanistan. Just as in Iraq one might add, where the recent WikiLeaks documents have been pored over by the New York Times, to show that it proves Iranian complicity in arming and directing terrorist groups against the US forces.

So they may have. They were also aiding and abetting with cash the forces of Moqtada al Sadr, al-Maliki and anyone else they thought was useful. As for working against the interests of the US, how else do you expect a country to behave which has been threatened by bombing by a power taking over the countries to the right and left of you?

With its two greatest regional enemies, Saddam Hussein and the Taliban, overthrown, Tehran could have hardly been more delighted and it rushed to offer convenient views, and co-operation with Washington to sort out the aftermath. It was an offer meant to limit US involvement as much as aid it, but it could have been built on to lock Tehran into the post-war reconstruction of the two countries. Instead it was flatly rejected.

And so, with British backing, the US has proceeded ever since, with a persistent and ever louder accusation that the Iranians are wreckers, determined to wreak havoc and terror wherever they stretch their hand.

It's a convenient view for the US military – and the WikiLeaks documents are from the military – because outside interference can be used to explain away their own failures in Iraq and now Afghanistan. And it suits the State Department, under Mrs Clinton as much as George Bush, because it allows a neat focus by which it can pursue a policy of isolation and crippling of the enemy of corrupt Arab regimes in the Gulf and Egypt and of Israel.

It also represents such a complete misunderstanding of Iran, its role, history and intentions that one stands aghast each time it rears its ridiculous head in public. Of course Iran has an interest in its neighbours and their future.

The Afghan wars have left it with over 2m refugees within its borders. The Iraq invasion has pushed as many into camps on the other side. As much as any other nation it wants stability next door. As much as any country it works to use its influence, through its Shia religious connections, aid and military assistance as well as its relations with radical movements, to produce friendly regimes about it.

But that doesn't mean it can command the Shia abroad, let alone deploy the fanciful "Shia Arc" which has so obsessed Washington analysts. The Shia fought without objection in the Iraqi army as it invaded Iran. The Hazara Shia are very much a minority in Afghanistan, where the majority Pashtun loathe them.

It is precisely because the Iranians are not Arabs or Sunni that they feel vulnerable and need to bring ever bigger bags of cash and arms into play. It's not a nice government. Indeed it's a particularly nasty one at the moment. But any diplomatic effort should be directed towards using Iran's influence and interests in stability positively, as Qatar's ruler, now on a state visit to Britain, keeps trying to say. Isolation is the worst policy.

The pity of it is that Britain, of all countries, should best understand that. Unlike America with its armed forces and China with its cash, both of whom feel they can proceed without local knowledge, Britain, which built an empire on few resources of manpower, could only do it by working the local power structure.

Instead, we now tamely follow a Washington policy towards Iran that is neither intelligent nor effective.

Cameron is playing a careful game

David Cameron continues to follow a careful and largely cooperative policy towards Europe, despite the demands of his backbenchers. He'll go along, he says, with Franco-German plans for treaty changes at the Brussels summit today so long as they don't apply to Britain and so long as the others agree to curb the EU's spending.

Fair enough on both points. But in some ways one might wish a more confrontational tone from London for the sake of others.

Chancellor Merkel's and President Sarkozy's wish for bringing members' finances under central control is understandable in the light of the Greek crisis. But messing around with treaty changes and asking countries to present their domestic budgets to Brussels before their own people is no way to do it.