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The United States' goal in Iran, in the broadest sense, is to integrate Iran into mainstream modern international relations in a way that will protect American economic, energy and security interests. As long as Iran continues to enrich uranium, the US will perceive these interests to be under threat and will seek measures to alter the security balance in its favor, preferably through regime change. US officials will not believe claims by Iranian officials that they seek uranium enrichment and plutonium separation for electricity generation only. This is not only because there exists cheaper ways to fuel power plants, but also because the threat posed by Iranian nuclear capability is simply too high for US policy-makers to accept any risks.

With the American military strained to breaking point in Iraq and Iran flying high on a wave of international support and high oil prices, America is facing the realization that a military strike on Iran is not a feasible option. Regime change seems equally unlikely. With Russia, China, and even France, signaling their adversity to sanctions, the United States must pursue a policy of carrots over sticks-looking to provide economic and political incentives to dissuade Iran from continuing to enrich uranium.

In order to do this, the US should look at the reasons for which Iran is seeking nuclear capability. In brief, these are: protection from external security threats; as an assertion of Persian power in a region where the US, Israel and Pakistan have nuclear weapons; and recently, to satisfy a domestic population that increasingly views Iran's nuclear program as a nationalist issue. Thus, any solution to the current standoff will need to address each of these core concerns. Meanwhile, the US will seek to preserve a firm bottom line that eschews all Iranian uranium enrichment and plutonium separation capabilities. Due to the possibility that future terror attacks could be sponsored by Iran, it would also be highly unlikely for the US to offer Iran a blanket security guarantee of the sort that helped persuade Japan, West Germany and South Korea to give up their nuclear capabilities.

To understand what the United States may be willing to accept, it is prudent to examine what the US has settled for in the past. First and foremost, US policy has sought to dissuade nuclear aspirants by alleviating their security concerns. This will be difficult vis-a-vis Iran because Washington will want to keep the option of armed intervention open. However, the US must realize that a diplomatic solution will require America to credibly assure Iran that it recognizes Iranian sovereignty and that there will be no use of force as long as Iranian compliance with IAEA obligations is satisfactory. The lack of such guarantees significantly undermined last summer's incentive package. Expect the US to settle for language similar to that found in the 1994 Agreed Framework with North Korea that extends "formal assurance? against the threat or use of nuclear weapons by the US," but that does not rule out future military action. Similar assurances should come from Russia, China, and the EU-3. As long as Tehran perceives a threat of regime change from outside, it will not relinquish its nuclear program.

Any diplomatic solution will also need to address the question of domestic energy supplies. Since Iran has already refused the offer of a five-year guaranteed fuel supply from Russia, negotiators will have to find a compromise that protects Iran's "sovereign right to a full nuclear fuel cycle." In 1994, the US offered North Korea limited oil supplies and the construction of two peaceful, proliferation-resistant, light-water reactors; similar concessions may be offered to Iran in exchange for stringent IAEA inspections and a list of past violations. Based on the Iranian nationalist sentiment surrounding the nuclear program, any US offers will have to be implemented immediately to allow Iranian politicians to save face-and to prevent the setbacks that occurred in North Korea. Complicated timetables will not suffice. Therein, dropping the precondition that Iran suspend all uranium enrichment for talks to proceed would be a productive and relatively innocuous concession.

Finally, the US will have to provide a targeted and timely package of economic incentives to encourage Iran to forego its nuclear program. The challenge for the Bush administration is to demonstrate to Iran that economic cooperation will be more beneficial than nuclear weapons in furthering Iran's goal of regional power. (With its unique experience, China could provide tangible and sincere assistance in this regard.) Last summer's offer of support for WTO membership, spare parts for civil airlines, and a framework for increased trade and investment are a step in the right direction. The US should accompany this with substantial fiscal support aimed at key areas of Iranian civil society such as public health and/or infrastructure development.

Washington's recent temperance seems to indicate that the White House has understood the costs of its bullying rhetoric towards Iran. With any luck, moderates in Tehran will seize the opportunity to end the cycle of reciprocal demonization and engage in a mutually productive dialogue.