When George W. Bush and Tony Blair met in Washington last week, it was not Iraq, but Iran, that claimed the best of their attention during a tour d’horizon of what is still a dangerous and unstable part of the world.

Iran is in a state of uncertainty. On the one hand there are powerful domestic forces that could lead Iran onto a new path of reconstruction and peaceful coexistence with the outside world. On the other, there are other forces, their power augmented by their control of the state apparatus and much of the oil revenue, that still pursue the dream of exporting their revolution.

The question for the outside world is: How to deal with this dual reality?

Iran must be engaged in order to alter its current trajectory. For if that trajectory is not altered it is bound, sooner or later, to lead into open conflict between Iran and the United States and its European and regional allies.

The idea that Iran could be isolated is a nonstarter. Iran has 16 neighbors, the largest number for any single country with the exception of Russia. It is located between the Arabian Gulf and the Caspian Basin that, together, contain some 70 percent of the world’s known oil reserves and almost 60 percent of its natural gas. On each side, only one country separates Iran from the three continents of Europe, Asia and Africa. Iran is also one of the world’s 20 largest and most populous countries. Nearly half of mankind are Iran’s immediate or near neighbors.

Iran is significant for another reason. Along with Turkey and Egypt it has had a leadership role in the Islamic world for centuries. With Turkey now looking to Europe and Egypt unable to forge a synthesis of its Islamic heritage and its modernizing ambitions, Iran is left as the only major country where Islam could still develop in both positive and negative ways. For the past quarter of a century the Iranian experiment has been a model for many Muslims and a warning to many more. That situation is likely to continue as Iran enters a new phase in its political development.

Now that we know that Iran cannot be ignored or isolated the question is: What to do about it? One answer is: Do nothing. This would mean letting the Iranians fight it out among themselves until they can create a coherent government capable of developing a national strategy. Here the danger is that the “ exporters of the revolution”, who control the nation’s wealth and the coercive forces of the state, might eliminate their opponents and establish a tyranny akin to that of North Korea or of Iraq under Saddam Hussein. That would mean letting a dangerous regime acquire nuclear weapon, and build up its arsenal of other weapons of mass destruction, if only for blackmailing its real or imagined adversaries in the region and beyond.

Another answer is to seek a détente-like deal with the hard-line faction. That would defuse the situation, at least for a while, but would also prolong the life of a regime that is now in deep, and possibly terminal, crisis.

Yet another answer is to engage the hard-line faction in negotiations aimed at addressing its grievances, allaying its fears, and ultimately persuading it to accept a set of changes in its behavior. But that could be seen by the pro-democracy movement as an act of betrayal and might well be construed by the hard-liners as a sign of weakness on the part of the Western democracies.

According to our sources, Britain favors engaging Tehran in a process of negotiations. British Foreign Secretary Jack Straw has visited Tehran four times in just over a year and believes that the hard line mullas understand the language of realpolitik and that, if assured that the West is not trying to overthrow them, will play game. There are also signs that the Bush administration may be tilting toward the British position. Mounting domestic opposition to American involvement in Iraq may well be one factor in persuading Bush not to turn the heat on Iran before the next US presidential election.

The British analysis may be correct as far as short-term considerations are concerned. In the medium and long-term, however, the present system is an anomaly and will have to change. We are only at the start of what could become known as the great Iranian crisis.