Washington, D.C. ? The Bush administration said Wednesday that retreat in Iraq would cede power in the country to Iran, the U.S.-labeled “axis of evil” nation that has become the bogeyman of the Middle East.

The troubled U.S. relationship with its chief Middle East adversary hung over this week’s watershed recommendations from President Bush’s top military commander in the Iraq war and the assessments of his top diplomat in the country.

Gen. David Petraeus warned Congress that the United States is already fighting a “proxy war” with Iran, and the U.S. ambassador in Iraq said his potentially groundbreaking diplomatic overture to Iran has gone nowhere.

Bush is expected to point to the potential threat from Iran in his address to the nation about his plans for an unpopular war now in its fifth year.

“Iran is a very troublesome neighbor,” Secretary of State Condoleezza Rice said on NBC’s “Today” show, adding that Iran’s president has said that if the United States exits Iraq, “Iran is prepared to fill the vacuum.”