The Iranians have good reason to believe America's threat is a bluff and that they'll pay no penalty if they keep enriching uranium. They paid no penalty when they started enriching, after all. Too many members of the Security Council rely on Iranian oil and thus have too strong an interest in seeing the oil continue to flow.
If President Bush wants to avoid a collision, he should be doing all he can to show Iran he isn't bluffing. At the Council on Foreign Relations seminar, Kenneth Pollack, a former CIA analyst and author of The Persian Puzzle, an excellent history of U.S.-Iranian relations, argued that a ban on capital investment in Iran would be useful. Iran's leaders seem genuinely fearful of economic sanctions (they came to the negotiating table last year only when Britain, France, and Germany seemed on the verge of imposing them); sanctions on investment are doubly threatening because they don't starve children (and therefore rally Western opposition to them on humanitarian grounds) and because Iran's economy is heavily dependent on foreign investment.
Investment sanctions would force Iran's ruling circles into a debate they'd rather avoid; they would have to ask themselves which they want more: a nuclear arsenal or a healthy economy? If the latter choice wins, not only would Iran's nuclear program be slowed down but the modernists within the government would be strengthened. If the former choice wins, at least we'll have a better picture of where we stand.
However, Pollack makes another argument: The Europeans (the biggest investors in Iran) aren't likely to sign on to sanctions unless the deal also gives Iran some rewards for making the right choice. There have to be not just sticks but also carrots—penalties from Europe if the Iranians keep enriching uranium and benefits from the United States if they stop.
The Bush administration has several goals when it comes to Iran: no nukes, no support of terrorists, and regime change. If Bush wants to avoid war, he may have to set priorities. If he concludes that the top priority is no nukes, he may have to set aside the other goals (which aren't likely to be satisfied soon anyway). More than that, he may have to offer Iran tangible security guarantees.
Christopher Hitchens has suggested in these pages that Bush go to Tehran, with a full package of inducements to join the world, in the same spirit that Nixon went to China. In the long run, this may have a better chance than military strikes of turning the country in the right direction.
It's unpleasant, but is there any choice? It's worth emphasizing that Iran does not have a nuclear weapon now, nor is it likely to for at least three years. A U.S. military attack would unleash a wider war—which might be acceptable if it snuffed out Iran's nuclear program, but by most estimates it would merely set the program back a few years. Meanwhile, it would only stiffen popular support for Iran's fundamentalist leadership and alienate the vast majority of Iran's population, which for now holds a favorable view of America.
Would a diplomatic initiative be productive? Maybe not. But a military strike might be completely counterproductive: It would probably impede, but not halt, Iran's nuclear program; it would enflame anti-American terrorism; and it would strengthen Iran's regime.