Worldview: When Condoleezza Rice announced on June 1st that the United States was ready to join direct talks with Iran initiated by Britain, France and Germany over its nuclear programme, she denied any interest in a "grand bargain" with that state.
The phrase has been used by foreign policy analysts in the US to define an overarching deal between the West and Iran, including security, political and economic guarantees in return for its co-operation.
This is taboo for the Bush administration's hard nationalists and neo-conservatives. They believe it is a counsel of appeasement directed towards a regime which should be changed. But it has increasingly been raised by realist and neo-realist critics of their policies who believe a completely different approach towards the Middle East is needed if a much wider conflict there is to be avoided. Their case is strengthened by the outcome of what many Arabs now describe as the sixth Israeli-Arab war - the first in which they were not decisively defeated.
The fact that the 33-day war between Israel, Hizbullah and Lebanon was a rough draw is momentous in the longer term. It means Israel can no longer rely on sheer force of arms to deter attack and preserve the gains made in previous wars. This has major implications, too, for US and European policy.
Two sharply contrasting conclusions can be drawn. The first is that this outcome makes another war inevitable. It would seek to re-establish Israel's martial advantage and its capacity for unilateral action. But this would much more easily become a regional war affecting the uncertain future of conservative authoritarian regimes in Jordan, Egypt and Saudi Arabia. Their ineffectual confrontation with Israel has been highlighted by what is regarded in the Arab world as Hizbullah's heroic success.
Thus high international stakes are involved, including for Israel's role as a proxy of US policy against Iran. Charles Krauthammer's extraordinary column in this newspaper on August 7th posed the question of whether after 9/11 Israel is an asset or a liability. Ehud Olmert's tremulous conduct of the war did not serve the US well, in that "America wants, America needs, a decisive Hizbullah defeat". This echoes Likudnik criticisms of Olmert in Israel as articulated by Benjamin Netanyahu.
But on the Israeli left the penny is beginning to drop. Writing in Ha'aretz newspaper Daniel Levy, a member of the Israeli official negotiating team at the Oslo and Taba talks and the lead Israeli drafter at the private Geneva Initiative to revive them three years ago, puts it like this: "An America that seeks to reshape the region through an unsophisticated mixture of bombs and ballots, devoid of local contextual understanding, alliance-building or redressing of grievances, ultimately undermines both itself and Israel."
He wants to see the US return to "proactive diplomacy, realism and multilateralism, with sustained and hard engagement that delivers concrete progress", which would best serve its own, Israeli and regional interests.
US policy is now much more closely associated and bound up with Israel's regional role - which has immeasurably reduced its political and diplomatic leverage. Policy-makers critical of Bush believe his stance is unsustainable. The Iraqi operation cannot last indefinitely and could not be joined by another war against Iran without gravely threatening the region's stability.
Richard Holbrooke, Clinton's former national security adviser, has written recently about the danger that these linkages are accumulating into a pattern resembling Europe's in July-August 1914.
The second conclusion is radically different. It draws on such criticisms of the Bush approach and raises once again the idea of a grand bargain in which mutual security between Israel, the Palestinians and the wider Middle East region, including Iran would be sought with the help of outside guarantors. And it raises in especially acute form the question of agency. Who among the outside powers has the credibility, leverage and will to broker such a bargain, predicated on the likelihood of an enduring rough draw between Israel and its neighbours? There is a strong case to be made that the US has lost this capacity, at least in the medium term, because of Bush's disastrous foreign policy record. It has, in the words of the historian of Europe's 20th century wars arising from 1914 Mark Mazower, "gambled on Israel and lost" - just as it did on Iraq. Its weakened leverage is illustrated in the bargaining over the ceasefire and UN force in Lebanon. This is having to come to terms with Hizbullah's success.
"US policy", Mazower writes in the Financial Times this week, "holds political and economic development in the Arab world hostage to a peace settlement with Israel without ever putting sufficient pressure on its ally to effect this." He goes on to say that if Europe "does not recognise its own pressing need to change this dynamic, the alternative is likely to be instability, regional repression and stagnation on its doorstep for the indefinite future". Europe's soft power there is substantially similar to that of the US, while historically and culturally it has more in common with the Middle East, but also its greater capacity to handle new security challenges like terrorism, the environment, globalisation and migration.
Anatol Lieven argues in the International Herald Tribune that Ireland's peace process offers a better model for dealing with Hizbullah, which is much more like the IRA and Sinn Féin than al-Qaeda. The end of IRA terrorism was achieved only through a long and arduous negotiating process involving concessions by both sides and its progressive political integration. He, too, calls for a giant inter-linked political package involving really serious security guarantees for Israel and the Palestinians as well as Iran.
Pursuing that relentlessly would give Europe real political leverage. But can its leaders escape the Cold War mindset which always awaits Washington's lead in security affairs? The immediate omens are not good, but the pressing need to do so will continue to drive this agenda.