‘During his inaugural appearance before Congress last week, the new U.S. intelligence czar made a rare public reference to one of Washington's secret dreads.

Mike McConnell, the new director of national intelligence, said there are funds coming from Saudi Arabia, an ostensible U.S. ally, to help Sunni insurgents in Iraq, while Iran is supporting the Shiite militias there.

McConnell's testimony undergirds U.S. concerns that the Iraq civil war could turn into a direct Saudi-Iranian confrontation, with American military forces caught between warring combatants for Islam's two dominant strains.

Separately, Brian Jenkins, a military expert with Rand Corp., a national security and foreign policy research organization, said: "What we already are seeing in Iraq is an emerging proxy war between Saudi-backed Sunnis and Iranian-backed Shia."

If that proxy war cascades into a direct Iranian-Saudi military clash, it could imperil much of the world's oil supply. Saudi Arabia, Iran and Iraq are Nos. 1, 3 and 4, respectively, in terms of proven oil reserves.’

Saudis Funding Insurgents In Iraq