Huge murals of the young "martyrs" who fell in the eight-year war with Iraq cover the sides of many buildings in Tehran. They are a constant reminder of the huge suffering inflicted on Iran by the devastating conflict Saddam Hussein unleashed in 1980.
Not surprisingly, Iranians are relieved to see the back of the Iraqi dictator. His removal has also enabled devout Iranians to visit Shiite holy places in Iraq, despite the dangers from mines and bandits.
For the fractured Iranian regime, however, the consequences of Mr. Hussein's fall and Iran's encirclement by US forces are far greater. The new situation presents opportunities as well as dangers that could shape both the internal power struggle and Tehran's relations with Washington.
American officials have accused Iran of trying to destabilize Iraq, but European diplomats in Tehran believe Iran has so far played a "reasonably constructive" role. Britain's former ambassador to the United Nations, Sir Jeremy Greenstock, agreed on Sunday, saying: "I think on the whole that they have been quite cooperative."
Iranian Foreign Minister Kamal Kharazzi has also promised Iraq credit of up to $300 million and offered cross- border electricity and gas supplies. A stabilized Iraq could boost Iran's regional power as the ally of Iraq's Shiite Muslim majority.
By proving it can be an "anchor of stability" in Iraq, Iran could also reduce American hostility, analysts say. This could pave the way to an eventual restoration of ties with Washington, which polls show would be very popular with ordinary Iranians. US Deputy Secretary of State Richard Armitage said on Tuesday that Washington was prepared to restore limited contacts with Tehran, a change he tied to Iran sharing intelligence on Al Qaeda, a move Tehran has so far rejected.
Observers see Iraq as a potential patch of common ground between the two countries.
"Tehran has given the Iraqi governing council more legitimacy than any Arab country," a senior European envoy says. "Like the US, Iran wants an Iraq that is stable, prosperous, nonthreatening, and democratic, which would accord Iraqi Shiites their due weight in running the country."
While the US was willing to allow Iran to help in Afghanistan, neoconservative hawks in Washington appear determined to prevent Tehran from having any role in Iraq.
"This is a big mistake," another European diplomat in Tehran says. "It risks driving Iran down the very path America is so scared of. If Iran is not allowed to get involved positively, there is the risk it will do so negatively."
The European Union's policy of "conditional engagement" with Iran, using carrots and sticks in contrast to US threats, was seen to have paid important dividends last week.
Britain, France, and Germany persuaded Iran to comply with demands for tougher nuclear inspections and to suspend its uranium-enrichment project to ease fears that Iran's nuclear energy program was a cover for developing the bomb.
The international community should also take measures to address Iran's "strategic loneliness" to steer Iran away from feeling it might need a nuclear deterrent, the European diplomat says. "Iran has few serious friends. We should be looking at regional security structures to tie Iran in and give it the feeling that it's not out in the cold."
The disorder in Iraq has enabled hard-line media to portray the US as a blundering superpower that has suffered an ideological and strategic defeat.
"They are also portraying the whole occupation of Iraq as an anti-Islamic move by the United States and posing the question: 'Why should we respect international conventions ... when the US so openly violates every international convention?' " says Sadegh Zibakalam, a political science professor at Tehran University.
Radical hard-liners, such as Massoud Dehnemaki, who edits a newspaper but is suspected of being a leader of a feared Islamic vigilante group, say Iran's hostility to Washington has been vindicated.
"Twenty years ago, people were burning the US flag in Iran. Now it is being burned in other countries," he says. "Twenty years ago, we said the UN was under the control of America. Now all countries say this."
Yet those such as Mr. Dehnemaki are a radical minority.
"The majority of the conservative and reformist leadership would prefer to see a stable Iraq," Mr. Zibakalam says. Iran wants an end to the American presence next door, but is playing a stabilizing role, he adds.