Security sources believe dissident Provisional IRA members have supplied the Irish National Liberation Army, which admitted yesterday's south Armagh bomb, with Semtex plastic explosive.
It is thought likely yesterday's bomb contained an amount of the explosive, which is used to "boost" the less-powerful main ingredient of fertiliser-based mixture.
Gardai have confirmed that members of the dissident IRA group, which styles itself the "real" or "true" IRA, have been observed consorting with members of the INLA, which is one of the most erratic and dangerous terrorist groups to have emerged in the North.
A number of INLA figures were also observed attending the funeral of Mr Ronan Mac Lochlainn, who was shot dead by gardai while trying to hijack a security van carrying cash in Co Wicklow in April.
Members of the other dissident republican group, the Continuity Army Council IRA, also attended the funeral.
It is believed the three groups have been exchanging materials and information with the intention of mounting attacks aimed at destabilising the peace process in the North.
The INLA was never known to have Semtex until April 12th last, when it admitted responsibility for a roadside bomb left in the Ballymurphy area of west Belfast for the security forces.
The bomb was discovered by local children, who handled it and were lucky not to have been killed. When the bomb was made safe by the British army it was found to contain Semtex. Security sources believe the Belfast INLA was supplied with the explosive by CIRA members who were, in turn, given it by members of the "real" IRA.
If yesterday's bomb was, as claimed, the INLA's doing, it is the first time the organisation has been responsible for such a bombing. It carried out a number of booby-trap and landmine bombings in the 1970s and early 1980s but never a car-bomb aimed at widespread damage.
INLA members are known to have bomb-making skills, but it is also possible that members of the "real" IRA in the Border area could have prepared the bomb for the INLA.
The INLA has a history of carrying out attacks designed to provoke loyalist retaliation. It sparked the spate of sectarian killings at the start of the year by shooting dead the dissident loyalist figure, Billy Wright, in the Maze Prison on December 27th last.
The INLA also killed a former loyalist, Mr Jim Guiney, in south Belfast on January 19th. It was also responsible for shooting dead one of its own members, Mr Cyril Stewart, as a result of a dispute in west Belfast on March 27th last.