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Iraq's Kurdish leaders are calling on the U.S. military to release an Iranian official who was detained in northern Iraq last week.

As NPR's Ivan Watson reports, the Kurds are worried that growing tensions with Iran could threaten their stability and economic success.

IVAN WATSON: The Suleymaniye Palace is considered the best hotel in this Kurdish city. Foreign diplomats, soldiers and businessmen often pass through its lobby.

(Soundbite of music)

WATSON: When the governor of Suleymaniye invited a large trade delegation from Iran last week, he put them up here. Eyewitnesses say, at 4:30 in the morning last Friday, American soldiers in civilian vehicles pulled up and then went to the room of one of the Iranians named Mahmood Farhady. When Farhady answered the knock at his door, the American soldiers detained him and quickly led him out of the building.

Dana Majeed, the Suleymaniye governor, was furious.

Governor DANA MAJEED (Suleymaniye): It was a very bad operations coming from the American Special Forces.

WATSON: Majeed rejects the U.S. military's contention that Mahmood Farhady was arming and training insurgents in Iraq. The governor acknowledges that Farhady is a member of Iran's Islamic Revolutionary Guards Corps but, he says, he was here to expedite trade and transit from Iran to Kurdistan.

On Monday, Iran demanded Farhady's release and shut down the border crossings to Iraqi Kurdistan. Majeed says the move may paralyze the economy of his landlocked region.

Gov. MAJEED: Seventy percent of what the people needs here is coming from Iran. It meets our economies and our foods. Our fuels depend on what's coming from Iran. It's very bad.

WATSON: Though the Kurds are close American allies, they also take care to avoid provoking their large and powerful neighbor to the east. Sheikh Ja'far is a Kurdish commander, who spent years fighting against the Taliban-like group called Ansar al-Islam, which he says get support from Iran.

Sheikh JA'FAR (Kurdish Commander): (Through translator) They were sheltered. They were given even weapons and supplies.

WATSON: Ja'far says earlier this year, Ansar al-Islam launched several new cross-border raids from the Iranian territory. And on August 16th, Iran began a cross-border artillery barrage at several points along the frontier, which has continued on and off for more than a month and forced more than a thousand Kurdish civilians to flee their homes.

(Soundbite of passing vehicle)

WATSON: In the remote mountain border district of Sewa, Kurdish officials showed a visitor entire orchards and fields that were reduced to ashes by Iranian rocket salvos.

Unidentified Man #1: (Foreign language spoken)

Unidentified Man #2: Do you see over there, it's all black?

Unidentified Man #3: (Foreign language spoken)

WATSON: Standing next to the ruins of a one-story stone hut, Hassan Mohamedi, one of the few villagers left here, described the bombardment.

Mr. HASSAN MOHAMEDI (Kurdish Farmer): (Through translator) There were days when 20 to 30 rockets would hit the village. In the beginning, we took our wives and children down to the valley to hide under a bridge.

WATSON: Iran says the artillery barrage is aimed at destroying PJAK. Since 2003, this shadowy group of mostly Iranian Kurds has been launching raids into Iran from bases on the Iraqi side of the border. PJAK's headquarters is in a remote valley, which was also recently shelled by Iran.

(Soundbite of running water)

WATSON: Next to a mountain stream, male and female militants dressed in green Kurdish combat fatigues smoked cigarettes in the shade.

Mr. BIRYAR GABAR (Commander, PJAK): (Foreign language spoken)

WATSON: One of PJAK's commanders Biryar Gabar claims his fighters killed more than 100 Iranian soldiers last month and shot down a helicopter while rappelling a series of Iranian ground defensives into Iraqi Kurdistan.

Mr. GABAR: (Foreign language spoken)

WATSON: Gabar says he and his 2,000 fighters are struggling to establish a secular democracy in Iran and he claims PJAK's leader Rahman Haj Ahmadi established ties with the U.S. government during a recent visit to Washington. But Gabar refused to offer details on the nature of the alleged relations.

PJAK may seem like a natural ally for the Bush administration in its growing confrontation with Tehran. But the group is an offshoot of another Kurdish separatist group called the PKK, which the U.S. has officially labeled a terrorist organization. Iran has repeatedly accused the U.S. of supporting PJAK. The American embassy in Baghdad denies any U.S. contact or support for either separatist group.

Ivan Watson, NPR News in Iraqi Kurdistan.

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