Both of these beliefs feed into a sense of constant insecurity on the part of Iran's policymakers. Indeed, both the United States and Israel are viewed as existential threats to the Islamic Republic. This is why "good-faith" offers from the West are reviewed with undue suspicion, dialogue is difficult, and it always seems to be "the wrong time" for Tehran to receive an important American visitor.

Iranian beliefs are magnified when conjoined with the nuclear issue. The issue has become heavily politicized, which increases Tehran's intransigence. It is very clear that among some segments of the Iranian elite--including in the Abadgaran-dominated Majlis--the acquisition of a nuclear fuel cycle that provides a deterrent against potential attackers is a way to guarantee security and obtain respect from the international community. They adamantly believe that Iran has a right under the Nuclear Non-Proliferation Treaty (NPT) to develop civilian nuclear power and question why the West has singled out Iran in its demands that Tehran give up its right under the NPT to an indigenous fuel cycle (in distinction to Brazil and other regional powers).

Conversations with "ordinary Iranians" give the impression that as long as Iran can produce cheap electricity from its nuclear generators, having an indigenous fuel cycle is not that important. But no one wants Iran to give up its legitimate rights without any sort of guarantees or benefits in return. Indeed, the ruling regime has been able to tap into nationalist sentiment to portray itself as the "defender of the people." U.S. policymakers are fooling themselves if they believe these deeply felt issues don't matter in dealing effectively with Tehran.

Policy Implications

The United States, and its EU allies, are facing a dug-in opponent. Recognizing that, the first step should be a prefatory call for calm. Distressingly, in the days following his victory, Americans were consumed by whether Ahmadinejad had been a hostage taker in 1979, rather than by a sober assessment of where U.S.-Iranian relations are headed. Washington should not pre-judge Ahmadinejad, despite his unsavory past rhetoric and actions. Any U.S. response should be based on what Iran does, not who its leaders are.

Biting sanctions, such as a multilateral ban on new investment in Iran's energy sector, will certainly face opposition from China and probably from some European countries. Both have entrenched economic interests in Iran. Many non-aligned countries are sympathetic to Iran's position on the fuel cycle. Building a coalition around sanctions will be tough.

The Bush Administration has concluded that an Iranian fuel cycle would pose unacceptable risks to U.S. vital interests, and it may decide that surgical strikes or other pre-emptive military action to set back Tehran's program is the only remaining option. But before reaching this conclusion, it behooves policymakers to accurately assess the costs of such an action. We should expect that Iranians will rally around the regime. In addition, Tehran could target U.S. troops in the region, terrorism in Israel could surge, Iran could interfere with tanker traffic in the Persian Gulf and an irreparable split in the transatlantic alliance could occur if the Europeans conclude action was unwarranted.

To decrease the chances of this lose-lose outcome, the U.S.-led West must devise a diplomatic option that puts more on offer and pays more attention to Iranian realities. Washington cannot continue outsourcing its Iran policy to Europe, especially since the incentives Tehran's leaders tell me they want are all "wholly owned property" of the U.S. government.

First--and, Iranians stress, most important--Iran wants a respected role in regional security and respect for its legitimate security needs. Second, Tehran wants at least a gradual unfreezing of Iranian assets in the United States and a parallel lifting of sanctions. Third, they want security guarantees, possibly as simple as President Bush stepping up to a microphone and stating that regime change is not U.S. policy. Guarantees would alleviate Iran's existential sense of insecurity.

Of course, entertaining these steps toward Ahmadinejad will be extremely distasteful for a U.S. administration that was loath to legitimize the Iranian regime even before the elections. But the reality is that Iran is the regional power, and the regime is stable. And all three steps could be taken incrementally and would be reversible if Tehran did not reciprocate. Beginning to put them on the table, either privately with Tehran or through the EU, would at least keep the diplomatic option alive through the rocky road that approaches.

The EU and the United States should also attempt to deal more directly with the supreme leader's foreign policy advisors, opening a track beyond the hard-line Ahmadinejad regime. We should also use friendly intermediaries to approach the leader's circle, including Ibrahim Al-Jaafari, Iraq's prime minister and the head of the Dawa Party. Dawa has long-standing political and financial links to Iran and excellent access to its leaders.

In the past, the United States has been reluctant to engage Iran solely on the nuclear issue, citing Iran's refusal to endorse the two-state solution to the Israel-Palestine conflict and Iranian support for terrorist groups. During my last visit, very high-level leaders in Tehran stated that Iran has moved on the two-state issue and will accept the decision of the Palestinian Authority. There is still no immediate solution satisfactory to both parties on the terrorism issue. But the West needs to solve the nuclear issue and cannot reach for all at once.

On the fuel cycle, there are several possible compromise outcomes, but either Tehran or Washington so far has rejected them all. Iran might agree to cessation of its program if guaranteed a constant source of fuel for civilian reactors and the above incentives. Tehran might agree to keep only part of the fuel cycle; for example, the so-called "Russian plan" gives Iran the right to convert raw uranium to gas, which would then be exported to a Russian or multinational facility for enrichment and sent to Iran as needed for its reactors. Iran in return would cease development of its enrichment program. Finally, atomic physicists on both sides might find a scheme under which Iran retains an extremely small enrichment capability, carefully monitored by the West; this scheme could give the West many years of warning time should Iran "break out" and pursue a large fuel cycle. Each outcome would leave Iran a measure of prestige, hopefully enough. Each outcome would leave both sides dissatisfied, but both must squarely face the alternatives.

If diplomacy does fail, the United States having gone the extra mile will significantly increase the chance that Europe and possibly Russia and some non-aligned nations are in lockstep as the crisis unravels. Washington has to close ranks with potential allies; a united Western front could even induce China to abstain from the debate. The lesson from Iraq is clear: If the United States hopes to succeed in Iran it will need more than a cosmetic coalition of the willing.

Diplomacy is a long shot. A lose-lose military conflict is a distinct possibility. But we should not foreclose negotiation so that this becomes the only possible outcome. We cannot be distracted by the setback that is the Ahmadinejad victory; we must play very tough odds.

1. This discussion of the Iranian economy draws on interviews held in Tehran with Bijan Khajehpour and Siamak Namazi of Atieh Bahar Consulting Group.

2. The discussions of victimization and insecurity draw on an excellent paper delivered in Tehran in March 2005 by Gholamali Chegnizadeh, professor at Alamah University in Tehran.

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