SIOUX FALLS, S.D. -- Vladimir Putin is on a roll. Last month, he made it clear that he intends to become prime minister -- and keep the reigns of power in the Kremlin -- when his second presidential term ends in March 2008. Last week, in the midst of a bravura "mini-summit" with German Chancellor Angela Merkel, Putin wowed the fawning European media by shrugging off a carefully leaked rumor of an alleged assassination attempt and by speaking fluent German -- a language he mastered as a KGB officer in Dresden during the Cold War. All this apparently took U.S. diplomats and intelligence agencies by surprise. But wait, there's more.

While in Germany, the macho Putin baldly told reporters -- and therefore all those who might contemplate military action against Iran -- "threatening someone, in this case the Iranian leadership and the Iranian people, will lead nowhere. They are not afraid, believe me." And just to make sure everyone got his point, two days later he went to Tehran for a Caspian littoral summit and reiterated to the world that Russia would block any moves to stop Iran's nuclear program. And to ice Putin's cake, reputable polls show that more than 70 percent of Russians approve of his leadership. Officials in Washington, London and Paris don't seem to be worried; but they should be.

Putin's Tehran gambit is much more than a rhetorical affront to the Bush administration's efforts to keep the Iranians from acquiring nuclear weapons. After meetings with President Mahmoud Ahmadinejad of Iran, the Russian president said, "Iran and Russia are now cooperating on a wide range of issues such as aviation industry, and Russia will continue its contribution to Iran's peaceful nuclear program." Most of the U.S. and European media's sound bites focused on the nuclear issue. Some news reports cogently noted that the Russian-built Bushehr light water nuclear reactor is capable of producing weapons-grade plutonium, but they ignored the array of gas centrifuges Iran is using to assure a dual-track approach to building nuclear weapons. Almost no one noticed that the new strategic synergy between Moscow and Tehran goes well beyond Bushehr.

First, with the price of petroleum soon to be at $100 per barrel or higher, both Iran and Russia have a financial interest in controlling how Caspian Sea oil makes its way to market. Putin and Ahmadinejad have now made it clear that they will dictate the terms by which Caspian crude will flow to the highest bidder.

Second, Moscow and Tehran share a strategic interest in bad outcomes for the U.S. in Iraq. An American collapse in Mesopotamia gives Iran the kind of regional hegemony that Persians have sought for centuries. And a precipitous U.S. withdrawal from Iraq would confirm Moscow's assertion that the U.S. is an unreliable partner -- thus undermining NATO's eastward expansion.

Finally -- if the joint statement issued after the so-called Caspian littoral summit is to be believed -- Tehran and Moscow have now coerced their neighbors into what amounts to a collective security agreement. According to Putin, "We are saying that no Caspian nation should offer its territory to third powers for use of force or military aggression against any Caspian state." Just in case anyone missed the point, Ahmadinejad added, "The Caspian Sea is an inland sea, and it only belongs to the Caspian states. Therefore only they are entitled to have their ships and military forces here." So much for any NATO plans to use air bases in Azerbaijan to launch, recover or refuel aircraft striking Iranian nuclear weapons facilities.

None of this was forecast by U.S. or allied intelligence agencies. Nor do we know what Presidents Putin and Ahmadinejad discussed in private. We can only hope that Putin's "aviation industry" reference doesn't mean that Iran is about to acquire hundreds of Bal-E anti-shipping missiles or that Tehran is planning to replace its ancient F-14s with a fleet of new Russian-built Su-27s. All we know for certain is that Iran, awash in petrodollars, easily can afford both and Moscow is in a selling mood.

Importantly, Putin the puppet master timed all of this to coincide with meetings among U.S. Secretary of State Condoleezza Rice, Defense Secretary Robert Gates and their Russian counterparts in Moscow. According to our State Department, the ostensible purpose of these meetings was to "review security issues of mutual concern in Europe."

To underscore how much we have "misunderestimated" Putin, President Bush, when asked by reporters what all this might mean to U.S. interests, responded, "I'm looking forward to getting President Putin's readout from the meeting." So much for U.S. intelligence and diplomacy.