If you want to see why our nation's policy on Iran has failed, look no further than a revealing episode at the World Economic Forum in Davos, Switzerland.

White House officials reportedly were "angered" that our ambassador to the United Nations, Zalmay Khalilzad, sat next to the Iranian foreign minister on a panel at the forum. He did not have a separate meeting or conversation or handshake with the foreign minister. He just sat next to him.

I could not believe my eyes when I read that. It should be a tip-off to the American public that there are key Bush administration officials who do not want to engage in diplomacy with Iran on any terms - with preconditions or without - let alone find solutions to some of the long-simmering issues.

Attitudes like this are petty and do not befit our great nation. Rather than worry about who is sitting next to whom, the Bush administration should get serious and launch a major diplomatic effort with Iran.

The stakes are simply too high. If the United States continues on our current path, it will only lead to higher tensions and increased risk, and it could allow a minor spark turn into a major conflagration.

We saw the very real dangers earlier this year in the Strait of Hormuz. Five armed Iranian boats sped directly toward three U.S. Navy warships. The captain of one of the warships turned his guns on the boats, and they quickly retreated. While no shots were fired, it is easy to imagine how an incident like this could spiral out of control.

To be sure, there is no excuse for provocation like this, and this is not the first time Iran has sought to increase tensions between our two nations.

Yet, this incident shows the grave risks of a status quo where tensions are high and the rhetoric on both sides is overheated.

Simply put, isolating a country doesn't work. It only promotes a deterioration of stability and increases threat. When nations don't talk, there is increased possibility of conflict.

By contrast, serious diplomacy, given the right timing and the right opportunity, can lead to progress. Our efforts in North Korea show that even the hardest knot can be unraveled with patience and effort.

So what should we do?

There are reports coming out of Tehran that suggest that the standoff doesn't always have to be. Reducing tensions could yield positive results, opening the door to new possibilities.

So I believe now is the moment for a bold U.S. diplomatic move to begin direct official talks with Iranian officials. And I believe the Bush administration's insistence that we wait until Iran suspends its enrichment program is counterproductive. This policy has given Iran incentives to increase its enrichment capacity under ever more hostile conditions.

The goals of such a negotiation would be to:

• Find a way to deal with Iran's nuclear program, especially by reaching an agreement to put more arms inspectors on the ground to monitor the entire Iranian nuclear program. As the Iranians continue to expand their nuclear capacity, we must increase our access rather than face the expulsion of all inspectors.

• Seek a major reduction or elimination of Iran's support for terrorists groups, including Hezbollah and Hamas, and other Iran efforts to disrupt the region - in both Israel and Iraq.

• Establish normalized relations with Iran, reducing the regime's threat to its neighbors and to the world.

When U.S. administrations have taken bold diplomatic initiatives, the payoff has been significant. The decision of Secretary of State Henry Kissinger and President Richard Nixon to engage the People's Republic of China in the early 1970s was visionary. The Bush administration's decision to work with the North Koreans directly to resolve the nuclear issue has begun to bear fruit.

Yet, this administration has taken a strikingly different tack with Iran. It's been talk of "World War III" and of sanctions. We need to bring Iran to the table, not back it into a corner. There have been some nascent steps at fostering democracy in Iran. Unfortunately, these have led to more government crackdowns than openings.

This is an historic moment. The United States is the only nation that can lead this effort. We don't need to - and shouldn't - do it alone. The process is likely to be painful and difficult, but the rewards significant. And one day, it could lead to a more stable and peaceful Middle East.