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In Western eyes, Iran's conduct in the case of the British soldiers does not seem logical. In the West, it is hard to understand why the Iranians would need to capture the British sailors and marines, and why they do not quickly release them. After all, with the provocation they generated, they are playing into the hands of the United States and Britain, which are perceived by Iran as plotting to attack its nuclear sites (together with Israel).

But Western logic is not necessarily Iranian logic. In capturing the British soldiers, in refusing to release them and in deciding to bring them to trial, Iran is seeking to signal to the world that it is determined to continue to advance its nuclear program, and not give in to international pressures, and to act resolutely against anyone who tries to harm it.

Nonetheless, it is also possible the case of the British soldiers reflects the power struggles that have been waging for many months in the top echelon of the Iranian government. For about a year and a half, two main camps have been facing off in Iran. One comprises the moderate conservatives led by former president Hashemi Rafsanjani; the mayor of Tehran, Mohammad Bagher Ghalibaf; and the secretary of the Supreme Council for National Security, Ali Larijani. All three competed in the presidential race about two years ago.

The second camp, the extreme conservatives, is led by Mahmoud Ahmadinejad, who defeated the moderates. This camp is supported by clerics like the messianic ayatollah, Mesbah Yazdi, and by the popular militia Basiji and members of the Revolutionary Guards. Besides these two camps, there is the weakened reformist camp, symbolized by former president Mohammad Khatami. The supreme leader, Ali Khamenei, rules over all of these.

In its refusal to accede to the UN Security Council's demand to suspend its uranium enrichment activity, Iran is ostensibly trying to show the world that the sanctions imposed on it are not weakening its hand. But Iran's moves attest to panic and weakness more than strength. Iran fears the profound international isolation in which it is becoming mired. In addition to concerns about the overt and "official" sanctions of the Security Council, there is fear of hidden sanctions. These are sanctions that international corporations, primarily banks and financial institutions, are imposing on Iran without publicly declaring so.

These sanctions are mainly driven by secret activity by the U.S. Department of Treasury, designed to pressure companies in the U.S., Europe and Asia to refrain from commercial ties with Iran, or at least to reduce them. In recent months, some 50 of the world's leading banks and financial institutions have complied with these pressures. The most prominent are Swiss bank UBS, Germany's Commerzbank and London-based HSBC. At the same time, the Bush administration is keeping pressure on the world's governments to cut back their commercial relations with Iran. India, for example, is being asked to cancel a project for laying a gas pipeline.

The boycott - both the overt one and mainly the hidden one - is intended to strike at the "soft underbelly" of Iran's economy: the oil and gas industries, which provide 80 percent of the state's revenues. And indeed, the economic stranglehold is bearing fruit. The oil industry and the gas industry, which desperately need billions in investments to renew their obsolete equipment, are finding it difficult to obtain financing. There is a significant decline in foreign investments in Iran. The religious establishment and the political establishment in Iran fear that the damage the sanctions are causing to the state's economy will stir public anger against them.

When the supreme leader realizes that Ahmadinejad's policy threatens the regime's survival, he will have to exercise his influence and authority, even at the price of painful concessions. The continued existence of Iran as an Islamic republic is the highest imperative guiding Khamenei. Whoever wishes to force Iran to back away from its nuclear program should further tighten the economic blockade on it.