Lebanese irony: how economic woes aid Shiite radicals' fortunes. Iran's generous funding is helping Hizbullah buy popularity among Lebanese Muslims. Shiites, in particular, have been hard hit by a rapid economic downturn. And radical groups are stepping in to provide social and other services - at little or no cost.

Lebanon's economic crisis has created new opportunities for Iranian-backed fundamentalists to increase their influence within the country's largest and poorest community, the Shiite Muslims. After years of resilience in the face of civil war, Lebanon's economy has sagged increasingly since 1985.

Shiite sources say the radical Hizbullah (Party of God), through clever use of Iranian funds, has won support by providing the Shiite community with a wide variety of social, financial, and other aid.

Estimates vary on how much financing a ``state within a state'' costs Tehran. One well-placed Shiite source says the Iranians are spending $1.5 million a month on social services alone. The total cost of funding Islamic radical groups has been estimated by other sources at between $3 million and $5 million monthly; yet other sources put the figure at more than twice that.

Hizbullah and other Islamic radical groups, as well as some 2,000 to 3,000 Iranian Revolutionary Guards, have had a solid base in the mainly Shiite Bekaa Valley of eastern Lebanon since 1982. In Baalbek, provincial capital of the Syrian-controlled Bekaa, the Islamic groups, helped by Iranian doctors, have been operating the 24-bed ``Imam Khomeini Hospital'' and providing other social services for some time.

But recent months have seen a considerable expansion of such ``hearts and minds'' activities in other areas where Shiites predominate - notably in southern Lebanon and Beirut's southern slums.

``They have definitely made inroads in the south,'' says one well-placed Lebanese Shiite source. ``They are very smart, and they know how to use their money. For example, they have bought a deep-bore drill, and are going around the villages, drilling artesian wells for people who would not otherwise be able to afford it.

``They have also bought tractors, and they offer to till land and plant crops in exchange for half the yield, so they are expanding rural production,'' he adds.

Analysts see Iran's investment in Hizbullah and other radical groups as a source of pressure on Syria - the main power broker in Lebanon - to remain a true ally with Iran against Iraq. The activities also provide Tehran a way to burnish its Islamic revolutionary credentials by sponsoring radicals' attacks on Israeli or Israeli-backed forces in south Lebanon. Last week, the pro-Iranian Islamic Resistance claimed responsibility for a guerrilla attack on an Israeli patrol boat off southern Lebanon. One Israeli sailor was killed.

Arab nations, which banded together against Iran at their summit meeting in Amman last month, are also concerned at the spread of Iranian influence. Iraqi Foreign Minister Tareq Aziz, interviewed by a Lebanese Christian radio station last week, said that an Iranian success in Lebanon could lead to sectarian disintegration throughout the Arab world.

Ample funds have allowed Hizbullah to buy popularity at the expense of the larger but poorer mainstream movement, Amal. According to one Amal source, his group is annoyed at Hizbullah tactics but ``can't do anything about it as they just don't have the money.'' Other Shiite sources, however, say that Amal - which is allied to Syria - still remains the biggest and most organized vehicle for Shiite political aspirations.

At present, Syrian troops controlling the Bekaa Valley and west Beirut tolerate the activities of the Iranian-backed radicals. But observers believe that, should it come to a showdown - perhaps in the event of a Syrian break with Iran - it might now be even more difficult for Syria to root out fundamentalists without colliding with the Shiite community as a whole.

The economic crisis has meant that many Shiite families - which tend to be large - can no longer afford even to buy pencils and exercise-books for children in school. ``So the Hizbullah has approached needy parents and is spending about 40 million Lebanese pounds [about $80,000] paying the childrens' school fees,'' another Shiite source says. The children are given free exercise books, with pictures of Iran's Ayatollah Ruhollah Khomeini on the front.

In the southern suburbs of Beirut, Hizbullah and its Iranian backers have sponsored a new ``Islamic cooperative'' supermarket to supply goods to the community at the lowest possible prices. They have also established Al-Hawrah, an ``Islamic'' maternity hospital staffed by women, which visitors praise for its cleanliness and efficiency - and its low fees. The Bank of Iran, run on the no-interest principles of Islamic banking, has opened a branch there too.

Hizbullah repair teams turn up to mend war-damaged houses free of charge. They have also bought trucks and bulldozers, and taken on the task of clearing away massive garbage piles from the streets.

Tehran has also been seeking to expand its influence among the country's mainly urban Sunni Muslim population.

Sheikh Saeed Shaaban, head of the Islamic Unification Movement, a fundamentalist Sunni group based in the northern city of Tripoli, has just returned from a lengthy visit to Iran, where he took part in an anti-Saudi conference on the holy places of Islam, and attended a meeting of ``Hizbullah cells in the Islamic world'' held at Tehran University. He was allowed to take home eight Lebanese prisoners-of-war captured while fighting for Iraq.

Some pro-Iranian Muslim groups have advocated the establishment of an Islamic state in Lebanon despite the country's large Christian communities. One such group, the Islamic Society, nominated four Shiite clerics to run in next year's elections for president - traditionally a Maronite Christian preserve.

Many Christians regard the growth of Iranian influence with dismay, and believe coexistence with the Islamic radicals is impossible. But Ayatollah Khomeini and his Lebanese followers are bitterly denounced by many Muslims, too.

Second of two consecutive articles on Lebanon's economic hardships.