LONDON — Europe and most of the rest of the world breathed a sigh of relief when President George W. Bush passed his first major foreign policy test. He got the crew of the American surveillance plane safely home, with no visible change in relations with China.

But that one was easy. They won’t all be that simple. Especially tough is what the new president will do with Iran, which will hold a presidential election of its own on June 8.
In the Islamic Republic, nothing is what it seems. Only in Iran would the democratically elected president also be the leader of the opposition. That is where Mohammed Khatami finds himself.

Four years ago he won the presidency with 70 percent of the vote, promising to extract democratic freedom from the political mullahs. His reform process led to an explosion of free-speaking newspapers and magazines and a society in which men and women could breathe more easily. When the republic held its first municipal elections, almost 200,000 moderates were put in office. Early last year the reformers won control of Parliament, another slap at clerical rule.

But under the Islamic Republic’s constitution a “supreme leader,” Ayatollah Sayed Ali Khamenei, elected by his fellow clerics, has the ultimate authority. He controls the security forces, the judiciary, the intelligence agencies, the state radio and television and, through the powerful Islamic business conglomerates called charitable foundations, at least 20 percent of the country’s economy.

Urged on by totalitarian theocrats opposed to the entire concept of reform, the ayatollah struck back. Using the judiciary as the main instrument of repression, he shut down the liberal press and jailed outspoken journalists. The Council of Guardians, controlled by hard-line clerics, blocked reform legislation. Students, long in the forefront of political dissent, have been battered into silence through long prison sentences imposed on many of their leaders. In the last month scores of secular dissidents and religious-nationalists have been arrested.
The United States has maintained a generally hostile relationship with Iran for two decades. If this posture was ever in the best interest of America, it is certainly not now. As America’s European and Asian friends have already recognized, Iran is here to stay, and it makes sense to have normal cultural, commercial and political ties.

So, what should President Bush do? First, help those forces within Iran that want to get rid of Saddam Hussein. For the first time, the Iranian-backed opposition to the Iraqi dictator has said it would work directly with the United States to topple Saddam.

Second, work with Iran to defeat Afghanistan’s ruling Taleban militia, which threatens Central and South Asia as well as the West. It provides a sanctuary for Osama bin Laden, the No. 1 terrorist on the CIA list. It is also a key security concern of Tehran. Ruled by fundamentalist Shiite clergy, Iran recognizes that its greatest enemy may lay on its eastern border. The ultra-orthodox Sunni regime has killed thousands of Shiites. Two million Iranians are addicted to the opium and heroin flowing in from Afghanistan.

Third, recognize that the Islamic Republic is of enormous strategic importance to the United States and its friends and allies. Sixty-five percent of the world’s known oil reserves lie below and around the Gulf. Iran has the second largest national gas reserves in the world. The Caspian Sea’s potential oil and gas reserves are estimated at $4 trillion. Ultimately, no policy for Caspian energy can ignore Iran.

America takes such a strategic view in its relationship with oil-rich Saudi Arabia, which, like Iran, mixes an Islamic constitution with its politics and supports terrorist groups. Unlike Iran, it recognizes the Taleban militia.

President Bush should take steps now to establish a relationship with Tehran.

The United States should continue to try to prevent the import of weapons of mass destruction into Iran, but it should lift other sanctions that not only block American corporations from trading with Iran but also allow penalties against foreign companies that invest in its oil industry.

The Iran-Libya Sanction Act comes up for renewal this summer. Mr. Bush should urge Congress to allow it to expire.

A fundamental change in U.S. policy toward Iran will be difficult to sell to the American people, conditioned by years of hostile rhetoric and a regime that has failed to reciprocate in any way to Washington’s goodwill initiatives. Nor will a new policy pay immediate dividends. There is likely to be at least one step backward for every two steps forward.

The test for Mr. Bush will be to establish and maintain a policy of self-interest with Iran - no matter what happens. In this, he can look at how his predecessors, including his father, handled China.

From 1949, when Mao Zedong marched triumphant into Tiananmen Square unleashing mass murder and government-inflicted famine, until 1972, when Richard Nixon reversed course, the United States had no relationship with China. Despite helping Pakistan, North Korea and Iran go nuclear, a deplorable human rights record and Communist leadership in Beijing, every U.S. president in the past three decades has worked to strengthen those links with China that serve America’s interests.

Since 1979, when the late Ayatollah Ruhollah Khomeini returned triumphantly to Tehran, unleashing the taking of the American hostages and declaring an Islamic revolution for export, there have been no ties between the United States and Iran. The American policy of seeking to isolate that country hasn’t worked. Mr. Bush has the chance to change that.

Stanley A. Weiss is founder and chairman of Business Executives for National Security. The views he expresses are his own.