US policy toward Iran is now a big, dangerous mess. President Bush again has backed us into a corner with his confrontational framing of every dispute as one of pristine virtue versus stark evil, putting us out of sync with our allies in Europe and probably giving the ayatollahs in Tehran a public relations boost at home.

In his State of the Union address, Bush singled out Iran as “the world’s primary state sponsor of terror…pursuing nuclear weapons while depriving its people of the freedom they seek and deserve.” For weeks we heard ominous warnings of war with Iran. Then, last week, Bush scoffed at the idea that we were going to bomb Iran as “ridiculous,” even as he menacingly noted that “all options are on the table.” Meanwhile, Europe continued to negotiate constructively with Iran to find a peaceful solution and prevent the proliferation of nuclear weapons.

The sad fact, however, is that Bush’s irrational policies and rhetoric have left the mostly fundamentalist leaders of Iran defending a more logical position than that of our own government on three counts.

First, it is our government that has long proclaimed the wonders of something called “the peaceful uses of atomic energy” to counterbalance the horror of having unleashed the power of the atomic bomb on Japanese civilians in World War II. In asserting its right to build nuclear power plants, Tehran is emulating the United States. The pact signed on Sunday in which Russia will supply the fuel for an Iranian nuclear power plant but Tehran will return spent fuel would seem to remove the threat that Iran’s now fully constructed Bushehr plant will be producing nuclear weapons material.

Second, the United States has been woefully uncaring about nuclear proliferation except when it proves politically convenient, as with the false prewar claim that Saddam Hussein’s Iraq might be close to acquiring or producing nuclear weapons.

Another example came after 9/11, when Washington dropped anti-proliferation sanctions against Pakistan while Bush focused his wrath on Iraq. Ironically, it was back in 1987, when the U.S. was backing Hussein in his war with Iran, that Pakistan’s top scientist first made overtures to sell nuclear technology to the ayatollahs in Tehran.

Pakistani scientist Abdul Qadeer Khan’s scandalous campaign to sell nuclear materials and knowledge to unstable countries such as North Korea and Libya, as well as Iran, was overlooked by successive U.S. administrations. Apparently, it was deemed too awkward to irritate our “allies” in Islamabad who helped us arm the mujahedin in Afghanistan against the Soviets, and, after 9/11, were enlisted to bring some of those same mujahedin to justice, including Osama bin Laden.

Even after the appalling extent of Khan’s sales ring was exposed in 2003, little was done. The Pakistan government pardoned Khan and won’t allow him to be interviewed by outsiders. Intelligence reports indicate that his black market mob may be operating again.

Finally, how can the president continue to escalate the rhetoric against Iran given that his invasion of neighboring Iraq has handed control of the country to Shiites trained in Tehran, like Grand Ayatollah Ali Sistani, as well as Kurds who have enjoyed significant Iranian support over the years?

So, tangled history aside, what should the United States do now about a repressive and potentially threatening government in Iran? The one thing Bush strangely has refused to do throughout the world: practice the principles of capitalism.

The model for such a policy, which emphasizes normal trade relations even with regimes that have religious and political obsessions different from our own, was most successfully employed by Richard Nixon in his famous opening to “Red” China, as well as in the detente period that should properly be credited with the ultimate fall of the Soviet empire.

The most powerful liberalizing forces the United States wields are not military, but economic and cultural. Though not as macho as trying to spread democracy through the barrel of a gun, normalization offers a better prospect of accomplishing that end, while saving billions of dollars and priceless lives.