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Iran presents a pressing new challenge for the U.S.

WASHINGTON—Virtually every year, the State Department issues a report fingering state sponsors of international terrorism. Without fail, the name at the top of the list is always the same: Iran.

"It is," said Iran scholar Ray Takeyh of the Council on Foreign Relations, "sort of an implicit acknowledgement of the failure of U.S. policy."

A generation after Iran's Islamic Revolution, getting Iran to abandon the pursuit of nuclear weapons, stop supporting international terrorism and accept Israel's right to exist is a more pressing—and dicey—challenge than ever for the United States and its partners.

Iranian President Mahmoud Ahmadinejad has steered his country of 70 million people on a sharply confrontational course with much of the outside world after only six months in office.

Tehran this month restarted activities that Western experts believe could lead Iran to acquire a nuclear bomb in coming years.

The nuclear drive has garnered the headlines and diplomatic attention, but "the problem is broader," U.S. Assistant Secretary of State Daniel Fried said in a Jan. 18 speech. "Not only is the regime in Tehran determined to develop nuclear weapons, it also supports terrorism. Not only does it support terrorism, the regime is hostile to democracy in principle. Ahmadinejad's bizarre remarks about destroying Israel remind one of another era."

Persian and Shiite Muslim Iran's actions in recent months have spooked Washington's Arab allies in the Persian Gulf, particularly Arab and Sunni Muslim Saudi Arabia, and led many analysts to worry that Ahmadinejad is trying to revive the fervor of the 1979 Islamic revolution.

"We've got a real problem with this guy, who doesn't particularly mind a conflict with the West" or fear economic sanctions, said Patrick Clawson, who studies Iran at the Washington Institute for Near East Policy.

And with the United States tied down in Iraq, "he thinks genuinely we're a paper tiger," Clawson said.

Secretary of State Condoleezza Rice, on a trip to Europe this week that will focus on nuclear diplomacy, plans to expand the conversation with her counterparts to include Iran's sponsorship of terrorism and human rights record, senior U.S. officials say.

The Bush administration, which never agreed on a formal Iran policy in its first term because of bitter internal disputes, has launched a broad review of its approach, but there are few attractive military, covert or political options.

Much of the U.S. military is tied down in Iraq or Afghanistan, and U.S. intelligence has few assets in Iran and little insight into Ahmadinejad's thinking. Russia is reluctant to get tough with a major trading partner, China is wary of confronting a major oil supplier, and many other nations are reluctant to follow Washington's lead after the administration's pre-emptive attack on Iraq. Despite Ahmadinejad's outrageous statements, even convincing some people that Iran is a potential nuclear threat is harder after the United States failed to find any weapons of mass destruction in Iraq.

Instead, the administration's policy review, led by Rice, is considering new ways of reaching out to the Iranian people—many of whom despise the regime—through increased broadcasting into Iran and more cultural exchanges, a senior U.S. official said recently. He requested anonymity because the review isn't complete.

The United States has approved more than $3 million in grants to groups working to promote democracy in Iran. The funds are given to groups outside Iran and the U.S. government hasn't identified the organizations to protect them and Iranians they work with from backlash.

Some lawmakers and Iran experts are calling for a major expansion of the pro-democracy program and retooling U.S. sanctions to allow for more people-to-people exchanges.

Some conservative Republicans and Jewish-American groups have begun pressuring President Bush to consider pre-emptive military action against Iran's nuclear program.

Iran's decision to resume work on centrifuges for enriching uranium at a plant in the city of Natanz has forced the United States, Britain, France and Germany into diplomatic overtime. They're striving to hold together a fragile international consensus and convince Iran that it's isolated and should reverse course.

If Iran persists, the Americans and Europeans eventually will press the United Nations to impose targeted economic sanctions, such as asset freezes and travel bans, that afflict Iran's leadership but spare its people, two senior European diplomats said.

Anticipating such a move, Iran has begun shifting its foreign reserves out of European banks, Ebrahim Sheibani, the governor of Iran's Central Bank, told reporters in Tehran on Friday.

The proposed steps reflect the limited options the United States has to inflict pain on Iran, the world's fourth-largest producer of oil.

Iran's leaders, past and present, appear determined to get the first nuclear bomb controlled by a Shiite Islamic state. Other nuclear states in the neighborhood include Israel and primarily Sunni Muslim Pakistan.

A military strike on Natanz and a uranium enrichment facility in Isfahan is feasible and would set Iran's nuclear program back, said former State Department official Cliff Kupchan.

"It wouldn't be that hard to do," said Kupchan, now with the Eurasia Group, a political risk consulting firm. "You'd be picking a helluva fight, though. Iran is a sophisticated country, with a very sophisticated leadership. It has a range of retaliatory options that are extremely unpleasant."

Those options include retaliation against U.S. troops in neighboring Iraq and Afghanistan; sponsoring terrorist attacks in the United States or elsewhere; or launching Shahab missiles at Israel or U.S. bases in the Middle East.

Trade sanctions on Iran's main export—oil—could hurt Iran's people, causing them to rally around their government. They also might push world oil prices well above their current level of more than $65 per barrel.

The United States has long had sanctions against Cuba and Iran, one of the European diplomats noted. "Sanctions are not the cure to all problems."

China, with its growing appetite for energy supplies, is unlikely to go along with trade sanctions in any case.

Yet the United States and its partners may not be without levers to influence Iran.

Senior U.S. officials and some analysts say they see signs of growing unease in Tehran's leadership with Ahmadinejad's radical foreign policy and argue that the new president has helped Washington make its case about the nature of Iran's regime.

"I think in fact the regime, which initially thought they had been very clever in getting him elected ... realize they've got a tiger by the tail. I don't think they're all that pleased about it," said Gary Sick, the top White House aide for Iran during the 1979-81 Iran hostage crisis.

Sick, now at Columbia University, cited press reports in Tehran of a recent session between Ahmadinejad and the foreign affairs committee of Iran's parliament, the Majlis. Parliamentarians apparently chided the new president for endangering Iran's international standing.

"There are a lot of people in Iran who think this guy's a real risk-taker," agreed Clawson. "Let's play on the splits."

Ahmadinejad is fond of saying that others need Iran more than Iran needs them.

But Iranians traditionally are proud of their large country with its important natural resources and rich cultural history.

And while Iran's president has threatened to brandish the "oil weapon," sending jitters through world markets, a drop in oil revenue would damage Iran's creaky economy. Despite its oil wealth, Iran imports 40 percent of its refined gasoline.

For now, U.S. policy is focused on convincing Iranians that their government, not the West, is the problem.

"If there were ways to better engage and reach out to the Iranian people, I would love to see them," Rice told journalists recently. "You know, soccer matches and musicians and university students and all those things, because this is a great civilization and these are a great people."

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(Knight Ridder correspondent Drew Brown contributed to this report.)

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(c) 2006, Knight Ridder/Tribune Information Services.

PHOTO (from KRT Photo Service, 202-383-6099): IRAN-US

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