Washington DC – In light of the National Intelligence Estimate on Iran released last week, the Bush administration’s choice to exclude Iran from the Annapolis meeting in late November looks all the more foolhardy. But the sole country from the region not to be invited to the summit was also the main reason why Washington put on the high-profile meeting to begin with. Secretary of State Condoleezza Rice dismissed any notion that Annapolis was more about isolating Iran than finding peace between Israelis and Palestinians. Yet, she said, the perceived threat from Iran provided the “regional context” of the conference – one in which the United States hoped that the Arabs would feel more compelled to make a deal with Israel, any deal, in order to push back Shia Iran.

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This approach has been tried before and has failed. Attempting to forge peace between Israel and the Arabs while seeking new regional arrangements by excluding Iran is self-defeating. Excluding Iran from regional diplomacy fuels rather than diminishes Tehran’s propensity to act the spoiler. Instead, Washington should use the carrot of Iranian inclusion to win much-needed behavioral changes from Tehran.

When the first George Bush administration organized the Madrid summit 16 years ago, Washington invited virtually every nation in the region with one exception: Iran. America was understandably confident at the time. It had just won the Cold War, and its United Nations-mandated coalition had handsomely defeated Saddam Hussein’s army.

Indeed, Madrid was a celebration of America’s new position as the sole superpower. The circumstances for peacemaking could not have been better.

In Tehran, the mood was somber. The Iranians believed they had played a helpful role during the Persian Gulf War by permitting the United States to use Iranian airspace and by resisting the temptation to fuel the Shia uprising in southern Iraq.

Now, Tehran hoped, Washington would reciprocate by bringing Iran in from the cold and inviting it to the Spanish capital. Madrid was, after all, not just about the Israelis and Palestinians, but the defining summit for forming the new Middle East order – one in which Tehran hoped to play a role commensurate with its geopolitical weight.

Tehran reacted bitterly to Washington’s snub. Some Iranian officials pointed to Iran’s participation in the Bonn, Germany, conference of 2001 on Afghanistan as an indication of the constructive role Iran could play when included. “We accepted a role in the Bonn conference on Afghanistan, and we wanted to participate in Madrid as well,” an adviser to former President Mohammad Khatami explained.

The non-invitation and the ensuing peace process – which Tehran saw as an effort to create a new Middle East order based on Iran’s exclusion – weakened Iran’s pragmatists and pushed Tehran toward more disruptive policies. If inclusion wasn’t in the cards, the policy of excluding Iran should be made as costly as possible to the United States, Tehran reasoned.

Through asymmetric warfare, despite its weakness and America’s military and political strength, Tehran contributed to the undoing of the peace process and the effort to lock in an anti-Iranian regional order.

Pursuing the same failed strategy once more indicates the triumph of hope over reason. What’s more, the tables have now turned: Tehran is riding high, while the United States finds itself in a debacle in Iraq. What failed under the best of circumstances is unlikely to succeed under much less generous conditions.

The cost of additional policy failures in the Middle East has grown exponentially, and there are a few realities Washington can no longer afford to ignore. First, a stable regional order cannot be achieved unless there is buy-in from regional powerhouses. Excluding states from regional diplomacy only provides them with incentives to undermine our efforts.

Second, Iran in particular must be included. Whether we like it or not, Iran is an undeniable regional power, and sustainable stability cannot be achieved without Tehran’s inclusion.

Third, inclusion will work to America’s advantage. While Tehran can make it costly for the United States to exclude it from regional decision-making, Iran cannot achieve its key objective – political inclusion – without American acceptance. This provides Washington with tremendous leverage that it thus far has failed to recognize. The United States can attain significant Iranian behavioral changes – on the nuclear front, Iraq, terrorism and Israel – through the carrot of inclusion that neither sanctions nor threats of war have achieved.

With the intelligence estimate pulling the rug from under the feet of the administration and its policy to confront Iran, it’s now all the more important that the White House get serious about diplomacy and use its winning card in direct negotiations with Tehran.

Trita Parsi is the author of “Treacherous Alliance: The Secret Dealings of Israel, Iran and the U.S.” and president of the National Iranian American Council. This article first appeared in Newsday.