The following is a guest analysis by James E. Doyle and Sara Kutchesfahani of the Los Alamos National Laboratory.  They write in their personal capacities.  This is a summary of a longer paper available here.

The current debacle over Iran’s nuclear challenge continues as intensely today as at its revelation three and a half years ago, when the National Council of Resistance of Iran, an Iranian exiled opposition group disclosed Iran’s secret nuclear fuel cycle program.  European efforts – lead by the EU3 (UK, France and Germany) - were unsuccessful in preventing Iran from resuming its enrichment program.  It appears the only choice for the international community is between giving in to Iran and allowing it to develop nuclear technology that could support a weapons program, or launch a military strike.  Following either of these choices will have disastrous consequences.  In fact, there is still a diplomatic opportunity that can resolve the nuclear crisis.  The Iranians need a package of incentives to relinquish their nuclear program and it is really only America, and not the Europeans, that can offer Iran what it wants and needs.  The time has come for a US-Iran rapprochement.
 
With serious mutual effort Iran and the United States can normalize their relations.  The United States has the carrots to entice the Iranians and the Iranians can also dangle their carrots in front of the United States.   The United States can guarantee Iran that it will not be the target of a military strike, recognize the legitimacy of  the Islamic Republic, and present the Iranians with important economic incentives.  The United States could maneuver its way to bilateral discussion of the nuclear issue through its Iraq channel. 
 
In exchange for a U.S. security pledge Iran must renounce both its call for the destruction of Israel and support for terrorism.  It must also demonstrate its willingness to reach a negotiated settlement of the nuclear issue by considering a verifiable suspension of all enrichment and reprocessing activities for at least a decade.

 
As for economic incentives, the United States could start by lifting its sanctions against Iran and by paying back Iran’s frozen assets.  The United States could also offer to pay Iran the $61.8 million it promised in compensation for the 248 Iranians killed in the accidental 1988 U.S. downing of Iran Air Flight 655.   The $61.8 million is much less than what has been taken from Iran’s frozen assets in the United States as a result of the 1979 US embassy hostage crisis in Tehran. Offering to pay at least part of this money and lifting sanctions could be important elements in a phased package of economic incentives offered to Iran in exchange to maintaining a moratorium on the development of its fuel cycle.  For example, in the ten year moratorium, for every two years that Iran has stopped its nuclear activities, the United States can reward Iran with part of the money it owes.  
 
Equally, the Iranians can be helpful to the Americans: they can be a stabilizing presence in the Middle East, they can offer the US its unrivalled regional and socio-political expertise in trying to overcome the regional difficulties.  Iran has the world’s second largest oil and natural gas reserves and is also the world’s fourth largest oil producer after Saudi Arabia, Russia and the USA. Its massive potential for foreign trade and investment coupled with its unique historical and political stature within the region strongly indicates how much Iran has to offer the US and why Iran cannot be neglected.  Iran is made up of a youthful population with 15-64 year olds making up 68% of the population and the literacy level stands at 79.4%. Iran already trades with the EU (the EU is Iran’s biggest trading partner), China, India and Russia – countries that have secure relations with the United States. 
 
Although Iran reneged on its agreement with the Europeans, resulting in a breakdown of talks and a joint EU/US approach, the EU can still be instrumental in restoring US/Iran ties.  The Europeans have the experience in dealing with the Iranians and this can be taken into account in supporting a US/Iran rapprochement. 
 
Neither allowing Iran to develop nuclear fuel technology for military purposes nor launching a military strike will make the Middle East any safer.  Either directly through the Iraq channel or by using the assistance of the EU, America and Iran must get to the negotiating table.  Once there, a determined effort to craft a compromise on the nuclear issue can succeed if both sides work creatively.  The effort must be protected from the inevitable political pressures arising from the strained relationship.  All possible diplomatic gestures, economic incentives and formal political commitments need to be considered in a far-reaching search for resolving the nuclear crisis.  This report explores possible pathways to a direct-U.S.-Iranian dialogue on the nuclear issue and suggests elements of compromise that are needed on both sides to resolve the crisis and stabilize relations.