US President Barack Obama's administration has lost little time in announcing that it will seek direct talks with the Iranian government. This means, at the very least, a tough confrontation over Iran's quest for a regional strategic advantage in the form of a nuclear weapon.

There is more at stake here than coming up with the right set of incentives and threats to change the Iranians' minds. Rather, the time has come to approach the nuclear question in its full regional context rather than piecemeal and operationally.

The entire world knows the risk posed by a nuclear Iran: A drastically altered balance of power in the Middle East and Central Asia, with Iran able to exert far more regional leverage - both overt and implicit - than it now possesses in pursuit of its interests.

Moreover, nearby states are likely to launch or further their own nuclear programmes in response, leading to a protracted nuclear arms race in one of world's most volatile regions. It is not in the interest of the US or Europe for any of the states at the head of the list - Egypt, Turkey, Saudi Arabia, Syria, and Algeria - to have its own nuclear weapons capability.

While neither outcome is certain, each remains likely. There is considerable domestic pressure in each of these countries - as there has been in Israel and Pakistan, currently the region's only nuclear states - to secure the presumed benefits in power and prestige of possessing nuclear weapons. Such pressure is magnified when rivals and neighbours are perceived to have any kind of strategic advantage.

Yet each of the region's states has important security concerns and vulnerabilities. Iran, a multiethnic state whose rulers have struggled to advance national cohesion, is no different.

Shi'a nationalism has followed Persian chauvinism as a rallying point, but neither has succeeded fully in bolstering Iran's political institutions and securing the allegiance of its young population, nearly two-thirds of which is under the age of 30.

The nation's unity is periodically threatened by its clerical rulers' unpopularity among large sections of the population, as well as by regional and ethnic divisions, conflict and instability in its immediate neighborhood, and the hostility engendered by its regional clients and/or proxies in Iraq, Lebanon, Afghanistan, and elsewhere.

In theory, all of these factors are potential sources of leverage for outside powers like the US. But opposing Iran's nuclear ambitions directly has had the opposite effect so far. Iran's quest for nuclear weapons - with its boost to national pride and promise of regional preeminence - has played a critical unifying role, as well as a political and military one.

The challenge is to craft a consistent policy that both contains and deters Iran's ambitions without exacerbating its inherent sense of national vulnerability. The policy debate outside the region currently centers on whether to use force if talks fail. Iran, predictably, has refused to back down, which some observers have suggested reflects the failure of the world's major powers to speak with a unified voice. This is true, but it is an insufficient explanation.

Others have claimed that Iran's leaders do not care one way or the other about world opinion. This, too, is an insufficient explanation, for no country, not even North Korea, lives in a vacuum.

Formulating the right mix of carrots and sticks is extremely difficult, and the US is hardly seen in the region as an honest broker. Therefore, its focus should be less on calibrating tactics per se than on recasting the regional context in which Iran's leaders will determine whether to proceed or desist.

The starting point should be further enhancement of conventional military forces throughout the region, which means more than increasing weapons inventories. There should be more confidence-building measures, including joint training exercises and information exchanges, among all the region's militaries.

A major boost to confidence would be a clear-cut strategic commitment from the West in the form of an extension of Nato's own deterrent to the Middle East. It need not single out Iran, and would be more effective than a unilateral US guarantee to Israel or any other single state. Instead, Nato members should pledge to defend any Middle Eastern state that is attacked with nuclear weapons. Under ideal diplomatic circumstances, Russia and China would be persuaded to join with Nato in a joint declaration.

Such steps alone are unlikely to deter Iran or fully to reassure the region's other states. But, along with continued international pressure from the UN Security Council and the International Atomic Energy Agency, they would send a clearer signal that the major powers of the world regard Middle Eastern peace and security as critical to their own. That would help to diminish the possibility of an unbridled regional arms race if talks fail and Iran someday tests a weapon.

The author is a fellow at the Robert Schuman Centre for Advanced Studies, European University Institute, and the author of Central Eurasia - Prize or Quicksand?

© Project Syndicate, 2009, www.project-syndicate.org