NEWS ANALYSIS : Despite Iranian Overtures, Tension With U.S. Grows : Diplomacy: Tehran may become for Clinton what Iraq was for Bush and Libya was for Reagan.

Fourteen years after Iranian revolutionaries ousted one of America’s closest allies, the United States appears no closer to figuring out how to deal effectively with the world’s only modern theocracy than it was at the beginning of Tehran’s 1979 upheaval.

In recent weeks, Iran has sent a flurry of tentative signals, both publicly and through third parties, about rapprochement with the new Clinton Administration. The latest was in a recent editorial in the English-language Kayhan International, which openly declared, “The Islamic Republic can and will have ties with all other countries, including Washington.”

But as Iran celebrated the anniversary of its revolution Thursday, there were signs that U.S.-Iranian tension may instead be heating up again as the fourth U.S. President since the end of Iran’s Pahlavi dynasty begins to define his foreign policy. Indeed, there are growing indications that Iran may become to the Clinton Administration what Iraq was for George Bush and Libya for Ronald Reagan--thus bringing U.S. policy on Iran full circle to the open hostility of the Jimmy Carter Administration.

“Iran is becoming the new evil empire,” said R. K. Ramazani, a University of Virginia specialist on Iran. “A tough anti-Iran line is becoming pervasive within the Washington Beltway” because the Tehran government is being perceived as expansionist and its Islamic ideology as a rival to Western democracy.

The new U.S. focus on Iran was reflected Tuesday in Kuwait, where a senior U.S. military officer warned Persian Gulf countries that Iran may be their new adversary. Speaking to officers from armies in the Operation Desert Storm coalition against Iraq, Air Force Gen. Jim Record also called on Arab states to hold joint war games regularly to prevent the possibility of Iranian aggression.

The U.S.-Iranian gap is also widening rather than narrowing because Tehran has either fumbled its recent overtures or fallen short of taking steps orchestrated in secret diplomacy through intermediaries.

The four-year flap over Salman Rushdie escalated last week, for example, because Iranian President Hashemi Rafsanjani, at a Jan. 31 press conference, stopped short of canceling the death sentence on the British author of “The Satanic Verses”--even though the move had been agreed upon with Western intermediaries, according to leading diplomats here. The Rushdie affair has been one of the main obstacles in relations between Western governments and Iran. (Related story, A5.)

Specific efforts to defuse hostility with the United States have also fallen short. During the Bush Administration, National Security Adviser Brent Scowcroft asked U.N. special envoy Giandomenico Picco to explore the possibility of a meeting between Secretary of State James A. Baker III and Iranian Foreign Minister Ali Akbar Velayati, according to well-placed sources.

But Iran balked for fear that talks, either public or private, would discredit Rafsanjani’s government. As a result, its public signals are limited to newspaper editorials.

Exasperation over Iranian half-steps and false starts is expected to lead to a tougher U.S. position, many analysts believe.

U.S. analysts have identified three policy options to deal with Iran:

* The first amounts to constructive engagement, or assisting Iran economically on the assumption that market reforms and prosperity will lead to political moderation. Rafsanjani’s government clearly hopes the Clinton Administration adopts this policy, according to Western envoys and as openly noted in Kayhan this week.

“Tehran-Washington ties is (sic) in need of defusing,” Kayhan said. “This period of expectation can be used very positively and constructively by the new U.S. Administration if it should have any interest in mending ties.”

The newspaper encouraged the Clinton Administration to get involved in Iran now rather than later because of the billions of dollars that Iran plans to spend abroad to reconstruct or modernize its industries. Otherwise, Kayhan said, “Washington will never be part of this bonanza. In a competitive trade world, this is a considerable loss.”

In truth, however, Iran’s troubled economy needs the United States in the short term far more than Washington could profit from Iran, which is now suffering a serious liquidity problem. But in the long term, the two nations together could produce significant new markets for each other, according to Western envoys here.

Constructive engagement with Tehran has long been practiced by Japan and key European nations such as Germany--at considerable profit until Iran became a credit risk over the past few months.

Although U.S. sanctions on Iranian imports are still in effect, U.S. exports to Iran increased from $167 million in 1990 to about $780 million last year, according to a coming report by the Congressional Research Service. The United States is now Iran’s fifth-largest trading partner. And last month, an Iranian oil delegation held talks with U.S. oil companies on possible future cooperation.

But during the last two Republican administrations, the U.S. experience with constructive engagement as a means of inducing policy changes in hard-line states--such as Iraq and South Africa--was distinctly unsuccessful.

The 1985-86 arms-for-hostages swap, which eventually resulted in the Iran-Contra scandal, was also predicated largely on engaging Iran in a constructive dialogue. But that was a debacle from which both countries have yet to recover and in which their perceptions of each other were seriously damaged, according to officials in both Washington and Tehran.

* The second option is the carrot-and-stick approach, or a more subtle policy of rewards for positive actions--such as improvement in Iran’s human rights record--combined with penalties for actions such as support for anti-Western groups in the Middle East and beyond.

Several U.S. specialists on the Mideast favor this approach, arguing that recent leadership shifts in both countries--the passing of Republican administrations tainted by the Iran-Contra affair and the death of the Ayatollah Ruhollah Khomeini, the supreme Iranian leader who imposed the death sentence on Rushdie--offer a new opportunity to gradually end one of the world’s most hostile relationships.

Indeed, Tehran feels that it has recently offered more than one concession to ward off the U.S. stick, most notably when Iran used its influence 14 months ago on Shiite Muslim brethren in Lebanon to end the most contentious issue between the two countries.

“Iran has already done its part by . . . using its influence to secure the release of American hostages in Lebanon,” the Kayhan editorial noted. “The new U.S. Administration can do its part . . . and show in concrete terms its sincerity in opening ties with Tehran.”

In light of Tehran’s quiet cooperation with the U.S.-led coalition against Iraq during Operation Desert Storm, the Iranian leadership also feels that it showed a new willingness to deal with the outside world.

Central to this option, however, is acceptance of the Iranian government. The Bush Administration publicly said it did not seek the overthrow of the Tehran regime, and Western intelligence agencies generally agree that no internal or external opposition group has sufficient support to challenge Rafsanjani’s government.

But late last year, Al Gore, now vice president, signed a letter circulated through Congress calling for U.S. support of the People’s Moujahedeen, one of the revolutionary groups that helped oust Shah Mohammed Reza Pahlavi in 1979 and later split with the Islamic fundamentalist clergymen who replaced him. The group, whose platform mixes Islam and socialism, has been waging a covert war for years from bases in neighboring Iraq, Iran’s old foe.

Before his inauguration, President Clinton also briefly met with Moujahedeen representatives, according to the Congressional Research Service report. “This suggests that recognition or support for the (Moujahedeen) might be under consideration,” wrote Kenneth Katzman, author of the CRS report and also of a new book on Iran titled “The Warriors of Islam.”

* The third option is containment, or doing whatever is necessary, including military action, to prevent the spread of Iran’s Islamic ideology, with the hope that its system will eventually collapse. This option is favored by Patrick Clawson, author of a new policy paper on Iran for the Washington Institute for Near East Policy, the influential pro-Israeli think tank whose director, Martin Indyk, recently left to become director of Mideast affairs on the new National Security Council staff.

“To the extent that basic U.S. interests are incompatible with Tehran’s drive to dominate (Persian) Gulf oil, confront Turkey . . . and provide support for anti-Western terrorism, the best U.S. policy may be containment,” said Clawson, who is now a fellow at the National Defense University.

Containment has also gained ground in Washington as Iraq--traditionally a regional counterweight to Iran--is disarmed and as political Islam penetrates deeper into the Middle East, most visibly in Egypt, Algeria, Jordan, Sudan and the Israeli-occupied territories.

“The need to balance out Iran has been cited as a reason why the Bush Administration refused to continue the Desert Storm offensive until (Iraqi President Saddam Hussein’s) overthrow, and some have even suggested that an eventual rapprochement with Iraq may be needed to keep Iranian ambition in check,” the new Congressional Research Service report says.

While the containment strategy was successful in dealing with Soviet-style communism, several U.S. analysts doubt whether Iran’s far weaker political, economic and military status and the vast differences between communism and Islam make this either viable or necessary.

Western envoys here also contend that any U.S. policy aimed at replacing the Tehran regime would probably take years, even decades, unless U.S. military action were involved.

Despite deep disillusionment throughout Iran with the ruling mullahs, Iranians are unlikely to respond to tougher isolation by moving against the regime, the envoys said. Indeed, containment could even backfire and actually help the theocrats, because Persian nationalism has historically been a rallying cry for any government.