A broken engagement.

IT MAY seem counterintuitive, but September 11 produced an opening for improved U.S.-Iran relations that could have enhanced the U.S. ability to marginalize the number one threat to U.S. and Western interests: fundamentalist, suicidal Sunni terrorism. However, continued U.S. antipathy pushed Iran to become more of a strategic competitor, leading it to retain tactical links to Al-Qaeda as well as to bolster radical Shi'a Muslim groups and other proxies. Instead of dividing our enemies, the Bush Administration united them against us.

Among the worst consequences of the Bush Administration's post-9/11 strategic choices is the unabated rise of Iran. The U.S. decision to reject Iranian overtures for comprehensive negotiations in 2003 and to topple Saddam Hussein without a prior regional consensus about what would replace him has strengthened the most hard-line elements of Iran's Islamic government, spurred its nuclear program, revived its expansionist ambitions and undermined pro-U.S. political factions throughout the Middle East. The question now is whether it is still possible to reach an understanding with Iran that will temper its motivation to play the spoiler and strengthen forces within the country that seek an end to extremism and isolation.

Immediately after 9/11, Iranians distinguished themselves by spontaneously demonstrating in sympathy with the victims of the attacks. At a multinational meeting on Afghanistan at the UN, then--Iranian Foreign Minister Kamal Kharrazi passed then--Secretary of State Colin Powell a note that read: "The United States should know that the Iranian people and the Iranian government stand with the United States in its time of need and absolutely condemn these vicious terrorist attacks", according to a U.S. diplomat who saw the document.

At the time, the Iranian government saw an opportunity to distinguish its behavior from that of Sunni radicals by defeating a regional rival and building on a warming trend with Washington, begun during the latter part of the Clinton Administration. A high-ranking Iranian diplomat told me:

      The general impression was that [9/11] was a national tragedy for
   the United States and that success in addressing that national
   tragedy was extremely important for the U.S. public in general and
   the administration in particular.... There was not another moment
   in U.S. history when there was more of a psychological need for
   success on the U.S. part. That is why we consciously decided not to
   qualify our cooperation on Afghanistan or make it contingent upon a
   change in U.S. policy, believing, erroneously, that the impact
   would be of such magnitude that it would automatically have altered
   the nature of Iran-U.S. relations.

The diplomat's comments show that Iranians were--and may still be--willing to cooperate with the United States, although no longer for free. Iran will demand, at a minimum, acknowledgement of its role in the region, particularly in the affairs of co-religionists in Iraq, Afghanistan and Lebanon. Iran will also seek economic concessions--especially a loosening of the U.S.-led embargo on investment in the Iranian oil industry.

Considering its recent and intensifying belligerence, it may be hard to believe that Iran and the United States did cooperate strategically in Afghanistan. Iran had long backed the Northern Alliance, an amalgam of anti-Taliban groups. Advisors from the Iranian Revolutionary Guards were present in Kabul when the Northern Alliance captured the Afghan capital in November 2001. Although most Americans are unaware of it, U.S. and Iranian representatives held one-on-one talks in Europe from 2001 to 2003. Senior State Department officials, including current U.S. Ambassador to Iraq Ryan Crocker and current UN Ambassador Zalmay Khalilzad, led discussions with Iranian diplomats in Geneva and Paris. (The talks grew out of the so-called Six-Plus-Two meetings, begun in 1997 by the United States, Russia and Afghanistan's neighbors about how to deal with the Taliban regime.)

The U.S.-Iran talks took place over non-alcoholic drinks and potato chips in hotel lounges and at the Paris home of then--UN Afghan Coordinator Lakhdar Brahimi. Among issues discussed: arresting and extraditing Al-Qaeda fugitives, the status of anti-Iran militants in Iraq and what the U.S. could expect if it toppled Saddam.

The talks, according to Iranian and U.S. participants, occurred on a nearly monthly basis from November 2001 to May 2003. The one exception: February 2002, after Bush's famous "axis of evil" State of the Union address. Iran, furious at being lumped together with Saddam's Iraq and North Korea, cancelled a round of the talks in a huff. Secretary of State Condoleezza Rice, when asked about the remark in 2006, said she had not considered what impact it would have on Iran before signing off on the language in Bush's speech.

Nevertheless, the Iranians swallowed their irritation and resumed the quiet dialogue with the Americans. Simultaneously, but separate from the talks, Iranian diplomats honed an agenda for broad negotiations on all key issues, including the nuclear program and Iran's support for anti-Israel Arab militants. The agenda, whose existence was revealed in 2006 by former National Security Council officer Flynt Leverett, was drafted by former Swiss Ambassador to Iran Tim Guldimann and then-Iranian Ambassador to France Sadegh Kharrazi--the nephew of Foreign Minister Kharrazi and a relative by marriage of Iran's supreme leader, Ayatollah Ali Khamenei. Mohamed Javad Zarif, then a deputy foreign minister and later Iran's ambassador to the UN, edited the document, which was faxed from the Swiss embassy in Tehran to the Swiss embassy in Washington and hand-delivered to the State Department in early May 2003. Iranians and Swiss have told me the offer was authoritative, backed by the supreme leader as well as by the government of President Mohamed Khatami. Convinced that it was winning in Iraq without the benefit of Iranian help, however, the White House rejected the overture out of hand.

It is impossible to know what would have happened had the Bush Administration taken up the offer. The talks could well have failed, and hard-line factions in one or both governments might have made any deal impossible. However, it is also possible that the Bush Administration's rejection of comprehensive talks led Iran to further complicate an already risky U.S. intervention in Iraq. Iran already had long-standing ties to Iraqi Shi'a groups that had sought refuge in Iran during the 1980-1988 Iran-Iraq War. After Saddam's fall, these groups were eager recipients of Iranian economic and military assistance. They also profited from the Bush Administration's failure to install an effective government in Baghdad to fill the post-invasion power vacuum.

The talks in Europe ended after they were revealed in USA Today--the White House appeared embarrassed by the disclosure--and Al-Qaeda staged attacks on American and other foreign compounds in Saudi Arabia, which the Bush Administration claimed were linked to Al-Qaeda members under "hotel arrest" in Iran. (Iran denied prior knowledge of the attacks and the United States produced no evidence to support its allegations.)

The talks could have been a turning point in relations. Iran could have been a strategic partner, rather than a competitor in Iraq and elsewhere in the region. A U.S. decision to recognize the legitimacy of the Khatami-Khamenei government after three decades of hostility would have empowered Iranian reformers. Iran's nuclear program, then in its early stages, might have been capped at that level. It is even possible that Mahmoud Ahmadinejad would never have been elected president.

Ironically, in invading Iraq on grounds that the country had weapons of mass destruction, the Bush Administration ignored its own pre-war assessment that overthrowing Saddam would spur the other two members of the "axis of evil" to accelerate their nuclear programs. Robert Hutchings, who from 2003 to 2005 headed the National Intelligence Council (NIC), said the body, which advises the president, warned that as a result of U.S.-led regime change in Iraq, both Iran and North Korea would "judge that their best option would be to acquire nuclear weapons as fast as possible because the possession of nuclear weapons offers protection [from an attack by the United States]."

Going ahead despite these warnings, the administration could still have mitigated its strategic blunders had it sought a regional diplomatic compact for Iraq before or immediately after overthrowing Saddam--something akin to the Bonn conference that produced a new government for Afghanistan in December 2001.

The consequences of the Iraq War--as carried out with only a handful of serious allies--were, to a significant extent, predicted by outside experts and the Bush Administration's own intelligence community. Employing a faith-based approach to geopolitics, the White House and civilian leadership of the Pentagon ignored or dismissed pessimistic scenarios and argued that removing Iran's biggest foe would advance the cause of freedom in Iraq and the wider Middle East. Then--National Security Advisor Condoleezza Rice captured this strategic chutzpah shortly after the U.S. invasion in 2003 in a meeting of top members of the NIC: "We're going to fix the Middle East just the way we fixed Europe after World War II." Those officers, one of whom described the meeting to me, could only shake their heads at her apparent naivety.

Rice, who says she has no recollection of making such a comment, ought to have known better.

The invasion of Iraq was a striking departure from traditional U.S. foreign policy, which had sought to balance Iraq's secular Sunni regime against Iran's Shi'a theocracy since the 1979 Iranian Revolution. Without a Sunni counterweight, the precarious balance in the Middle East has shifted dramatically. We are now left with power vacuums being quickly filled by Iran's Arab proxies.

Saddam's overthrow, however, did open a window for discussion of Iran's nuclear program. Initially unnerved that U.S. forces had accomplished in a few weeks what Iran failed to do in eight years of fighting in the 1980s, Iran made an offer of comprehensive negotiations with the United States. When Washington rebuffed the overture, Britain, France and Germany stepped into the breach. Iran agreed to negotiate with them about its nuclear work and to suspend its uranium enrichment program for the duration of the talks.

Bush Administration support for the European negotiations was not enthusiastic. John Bolton, then undersecretary of state for proliferation matters, fell asleep--or pretended to--during a 2004 meeting to which he had summoned European negotiators. By Bush's second inauguration, European allies were clamoring for the entrance of the United States into the negotiations, which they believed critical to success.

Rice, by then secretary of state, convinced Bush in March 2005 to agree to consider providing spare parts for Iran's aging civilian jetliners and to no longer block consideration of an Iranian application to join the World Trade Organization. The concessions were conditioned on Iran agreeing to give up its efforts to make uranium fuel. Richard Haass, Powell's policy-planning chief during the first Bush term, had proposed such gestures back in 2001 to politically strengthen pro-engagement Iranians. By 2005, they were too late to arouse much Iranian excitement. A European offer of guaranteed nuclear fuel and technical assistance for Iran also came too late to impress Tehran. It was put forward--and rejected--as Khatami left office in August 2005. Iran restarted yellowcake production at Isfahan as Ahmadinejad assumed power; five months later, it resumed work at the uranium enrichment plant in Natanz.

Since 2006, Iran and the United States have been caught in an escalatory spiral. In February 2006, the Bush Administration persuaded the board of the International Atomic Energy Agency to refer Iran to the UN Security Council, where the United States has pushed for economic and other sanctions. The administration also asked Congress for $75 million to support democracy and human rights in Iran--an action interpreted by the Iranian government as promoting regime change. In May 2006, Rice offered comprehensive talks with Iran, in company with the Europeans, if Iran would suspend its nuclear program. Iran has refused to accept preconditions for negotiations. Instead, it has accelerated the program, increasing its bargaining power in any future negotiations.

Despite the new sanctions and a reduction in European trade and investment, Iran has installed several thousand centrifuges at Natanz and produced small quantities of low-enriched uranium. Meanwhile, it has retaliated for new economic punishments by making life increasingly miserable for U.S. forces and allied factions in the Middle East.

This retaliation, too, was to be anticipated. Since Iran freed U.S. embassy hostages in 1981, its Islamic regime has largely confronted the United States indirectly, through proxies trained and funded by Iran's Revolutionary Guards. In February 2006, Mohsen Rezaie, who commanded the Guards from 1981 to 1997, laid out two scenarios for U.S. policymakers. The United States had a "golden opportunity" to engage Iran and work to solve regional problems, he told me in an interview at his home in a restricted military district north of Tehran. But if the United States took Iran to the Security Council and stepped up sanctions, "everything would be changed overnight and there would be serious problems for the United States throughout the Middle East."

The second scenario is now unfolding: Iraq is continuing to fracture and the Iranian sphere of influence there is growing. The pro-Iranian government in Baghdad has rejected actions that could appeal to minority Sunnis and Iran has-according to the U.S. military--stepped up funding, arming and training Shi'a groups. In Palestine, Hamas, with Iranian support, has taken over Gaza and continues to oppose U.S.-backed peace efforts and the rival Palestinian government of Mahmoud Abbas. In Lebanon, the pro-U.S, government of Fouad Siniora is in increasing jeopardy while Iran's main Middle East proxy, Hizballah, bolstered by Iranian reconstruction help, is consolidating support among Lebanon's Shi'a plurality. In Afghanistan, the Taliban is making a comeback and there are reports that Iran is supplying weapons to its old foe, reasoning that the "enemy of my enemy is my friend."

On a more positive note, formal U.S.-Iran talks about Iraq have taken place in Baghdad between delegations led by the two countries' respective ambassadors. While no appreciable progress has been made, the talks at least offer a channel for communication that could reduce the chances of miscalculation.

There is also the possibility of a direct confrontation. American forces have been arresting Iranians in Iraq and might bomb Iran in hot pursuit of Iranians providing weapons and training to Iraqi militants. Continued Iranian progress on uranium enrichment might convince Bush that the United States must act to retard the program before he leaves office--although it would be impossible to take out the program in its entirety and an attack would likely rally Iranians around an otherwise unpopular regime. A U.S. strike on Iran would also benefit Al-Qaeda, providing yet another pretext for new attacks against Americans throughout the world.

A U.S. withdrawal from Iraq could help change the equation. It would reduce the number of potential U.S. targets for Iran in Iraq and refocus Iran on shoring up its Shi'a clients there against Sunni resistance. On the other hand, American prestige throughout the region would suffer from such a decision--although it's hard to see how it could sink much lower than it already has. It is also hard to see how the region can become more stable without some form of accommodation between the United States and Iran. Iran is simply too influential in too many places, partly because of U.S. missteps.

Despite so many missed opportunities, the United States and its allies retain leverage with Tehran--Iran's desperate need for foreign expertise to upgrade its oil industry is one example. A U.S. offer to negotiate with Iran without preconditions--coupled with continued economic pressure--could strengthen more pragmatic figures in the regime, including National Security Advisor Ali Larijani and former President Akhbar Hashemi Rafsanjani. Otherwise, detente may have to wait until Iran--like Russia and China before it--has nuclear weapons and has become an even more formidable strategic competitor.

Barbara Slavin is senior diplomatic reporter at USA Today on leave as a Jennings Randolph fellow at the U.S. Institute of Peace and the author of Bitter Friends, Bosom Enemies: Iran, the U.S. and the Twisted Path to Confrontation (St. Martin's Press, 2007).