IN the wake of the new National Intelligence Estimate on Iran’s nuclear program, Democrats and others are criticizing President Bush for again having “hyped” a nuclear weapons threat. This criticism, while deserved, does not address the critical policy question: What do we do now?

Clearly, the United States cannot ignore Iran. Tehran may have suspended the purely weapons-related aspects of its nuclear program, but it continues to master uranium enrichment, with no agreed limits in place. And Iran is well positioned either to facilitate or thwart American objectives in Iraq and across the Middle East.

At the same time, the Bush administration’s single-minded insistence on increasing international pressure on Iran seems increasingly detached from reality. Even before the intelligence estimate, there was no set of sanctions with any chance of being endorsed by the Security Council (or even the relatively cooperative European Union) that would have given Washington and its allies real strategic leverage over Iranian decision-making.

Indeed, as oil prices shoot up, American insistence that Iran’s hydrocarbons — including the world’s second-largest proven reserves of conventional crude oil and natural gas — stay in the ground until America gets an Iranian regime it likes is simply not practical over the long term.

The idea of “engaging” Iran diplomatically is becoming less politically radioactive than it was early in the Bush years, when any officials who broached it were putting their careers in jeopardy. Given official American-Iranian cooperation over Afghanistan and Al Qaeda after the 9/11 attacks (one of us, Hillary, was involved in those negotiations) and the current sets of talks between American and Iranian officials in Baghdad, Secretary of State Condoleezza Rice’s claim that she is willing to change “28 years of policy” and negotiate with Iran is disingenuous.

Still, even Democrats who have talked about “engagement” have yet to spell out what it would take to engage Iran successfully. Most hide behind a vague incrementalism, epitomized in a recent statement by Hillary Clinton’s top national security adviser extolling the candidate’s willingness to consider “carefully calibrated incentives if Iran addresses our concerns.”

Why should any Iranian leader take such rhetoric as a legitimate invitation to the table? Iran has tried tactical cooperation with the United States several times over the past two decades — including helping to secure the release of hostages from Lebanon in the late 1980s and sending shipments of arms to Bosnian Muslims when the United States was forbidden to do so.

Yet each time, Tehran’s expectations of reciprocal good will have been dashed by American condemnation of perceived provocations in other arenas, as when Iranian support for objectives in Afghanistan after the 9/11 attacks was rewarded by President Bush’s inclusion of Iran in the “axis of evil.” Today, incremental engagement cannot overcome deep distrust between Washington and Tehran — certainly not rapidly enough to address America’s security concerns.

From an Iranian perspective, serious engagement would start with American willingness to recognize Tehran’s legitimate security and regional interests as part of an overall settlement of our differences. But neither Republicans nor Democrats have been willing to consider such an approach, because of the pursuit of a nuclear weapons option and support for terrorist organizations that Iran employs to defend what it sees as its fundamental security interests. Successful United States-Iran engagement requires cutting through this Gordian knot by undertaking comprehensive diplomacy encompassing the core concerns of both sides.

From the American side, any new approach must address Iran’s security by clarifying that Washington is not seeking regime change in Tehran, but rather changes in the Iranian government’s behavior. (While Secretary Rice has said recently that overthrowing the mullahs is not United States policy, President Bush has pointedly refused to affirm her statements.) To that end, the United States should be prepared to put a few assurances on the table.

First, as part of an understanding addressing all issues of concern to the two parties, Washington would promise that it would not use force to change Iran’s borders or form of government. (This would be a big shift: before the Bush administration signed on to a European-drafted incentives “package” for multilateral negotiations over Iran’s nuclear activities last spring, it insisted that all language addressing Iran’s security interests be removed.)

Next, assuming that American concerns about Iran’s nuclear activities, provision of military equipment and training to terrorist organizations, and opposition to a negotiated Arab-Israeli settlement were satisfactorily addressed, Washington would also pledge to end unilateral sanctions against Iran, re-establish diplomatic relations and terminate Tehran’s designation as a state sponsor of terrorism.

What would Iran have to concede? It would first have to carry out measures — negotiated with the United States, other major powers and the International Atomic Energy Agency — definitively addressing the proliferation risks posed by its nuclear activities. This would include disclosing all information relating to its atomic program, past and present, now being sought by the atomic energy agency, and agreeing to an intrusive inspections regime of any fuel cycle activities on Iranian soil.

Tehran would also have to issue a statement supporting a just and lasting settlement to the Arab-Israeli conflict based on current United Nations Security Council resolutions. This statement would affirm the idea of a two-state solution to the Israeli-Palestinian conflict as expressed in the 2002 Security Council resolution, and also the Arab League’s commitment to normalized relations with Israel after it has negotiated peace agreements with the Palestinians and Syria.

Iran would also have to pledge to stop providing military supplies and training to terrorist organizations and to support the transformation of Hamas and Hezbollah into exclusively political and social-welfare organizations. Iran, in fact, proposed these steps as part of its offer for comprehensive talks that was passed to the Bush administration through Swiss diplomats in 2003. (Today, it’s clear that Hezbollah’s transformation would need to be linked to reform of Lebanon’s so-called democracy to end systematic Shiite under-representation in Parliament.)

Even if both sides agreed to such bilateral steps, a lasting rapprochement could be achieved only if Washington and Tehran worked out a more cooperative approach to regional security. The obvious first step would be collaborating on a plan to stabilize Iraq, acting in concert with that country’s other neighbors. Without a regional consensus on a post-Baathist political settlement, Tehran will continue its 20-year practice of supporting Iraqi Shiite factions and militias.

The goal of such cooperation would be a multilateral body analogous to the Organization for Security and Cooperation in Europe. Each member nation would commit to abide by international norms regarding respect for other states’ sovereignty, the inviolability of borders and the observance of international conventions and United Nations resolutions on conflict resolution, economic relations, human rights, nonproliferation and terrorism.

Since Ayatollah Ruhollah Khomenei’s death in 1989, United States policy toward Iran has not served American interests. Neither continuing to disregard legitimate Iranian interests nor timid incrementalism will improve the situation. In the long run, the real lesson of the new National Intelligence Estimate is that we need a comprehensive overhaul of American policy toward Iran.