IRAN: THE SPYING GAME; Washington calls the MEK a terrorist group. But some administration hawks think its members could help provide intelligence on Iran's quest to develop nuclear weapons.(Mujahedin-e Khalq (People's Holy Warriors))

Byline: Christopher Dickey, Mark Hosenball and Michael Hirsh (With John Barry and Richard Wolffe)

This is a terrorist cult leader? Maryam Rajavi is dressed in a Chanel-style suit with her skirt at midcalf, lilac-colored pumps and a matching headscarf. Over a dinner of kebab, rice and French pastries, Rajavi smiles often and laughs easily. She's at once colorful and demure, like many an educated woman in the Middle East. Indeed if George W. Bush--who relies on powerful females for counsel--were pressed to identify a Muslim model of womanhood, this 51-year-old Iranian would look very much the part.

But of course that's exactly the impression Rajavi seeks to give. Behind her smile is a saleswoman's savvy--and a revolutionary's zeal to prove that she and her mysterious husband, Massoud Rajavi, are neither cultists nor terrorists. Maryam Rajavi is demanding that the exile groups they lead together, centered on the Mujahedin-e Khalq (People's Holy Warriors), or MEK for short, should be taken off the State Department's list of terrorist organizations, their assets unfrozen and their energies unleashed. The MEK, Rajavi says, is the answer to American prayers as Tehran continues to dabble defiantly in both terrorism and nuclear arms. "I believe increasingly the Americans have come to realize that the solution is an Iranian force that is able to get rid of the Islamic fundamentalists in power in Iran," she told newsweek in a rare interview at her organization's compound in the quiet French village of Auvers-sur-Oise. The group's own former role in terrorist attacks dating back to its support for the U.S. Embassy takeover in 1979, Rajavi insists, is ancient history. And the MEK is not a Jim Jones-like cult as critics allege, with forced separation between men and women and indoctrination for children, all overseen by the Rajavis' autocratic style. Instead, she insists, it is "a democratic force."

Whatever Rajavi's true colors, news-week has learned that her role may be growing in the calculations of Bush administration hard-liners. At a camp south of Baghdad--it's called Ashraf, after Massoud Rajavi's assassinated first wife--3,850 MEK members have been confined but gently treated by U.S. forces since the invasion of Iraq (once they were allies of Saddam against their own country in the 1980s Iran-Iraq war). Now the administration is seeking to cull useful MEK members as operatives for use against Tehran, all while insisting that it does not deal with the MEK as a group, American government sources say.

Some Pentagon civilians and intelligence planners are hoping a corps of informants can be picked from among the MEK prisoners, then split away from the movement and given training as spies, U.S. officials say. After that, the thinking goes, they will be sent back to their native Iran to gather intelligence on the Iranian clerical regime, particularly its efforts to develop nuclear weapons. Some hawks also hope they could help to reawaken the democratic-reform movement in Iran, which the mullahs have silenced. "They [want] to make us mercenaries," one MEK official told newsweek. Yet the administration's new engagement with MEK members has, so far, done little to clarify its still-murky approach to Iran. That is worrisome to many critics at home and abroad--especially since Vice President Dick Cheney said in recent weeks that Iran was now at the "top" of the president's national-security agenda. Last week, on her first trip abroad as secretary of State, Condoleezza Rice sought to play both hawk and diplomat, reviving the old role she negotiated so often as Bush's national-security adviser. Pressed by reporters, Rice declined to ...