Washington, we have a problem. The famous distress call from Apollo 13 in 1970, not to Washington but to Houston, resonated last week as Nasa brought the space shuttle safely home after a white knuckle ride. But what brought that memorable phrase back to me was not the shuttle’s epic survival, but rather the shipwreck of American foreign policy towards Iran, highlighted by new suggestions yesterday from President Bush that America might resort to force.

Nothing has gone right. Establishing democracy in Iraq was meant to strengthen the moderates in Iran and topple the corrupt autocracy of its mullahs. American sanctions against Iran were supposed to warn it off developing nuclear technologies. If those measures did not work, hints of military attack ought to have done the trick. If none of the above, perhaps bribery would succeed.

Hopes have been dashed. Mahmoud Ahmadinejad is now president. He was the mullahs’ candidate. He campaigned on issues such as public probity and private piety. During his stint as mayor of Tehran he imposed dress codes on public servants and banned advertising that featured the face of David Beckham. He trounced the pragmatic former president Akbar Hashemi Rafsanjani, the contender favoured by the West. America is unlikely to proclaim the result as a triumph for emerging democracy.

US sanctions have not led to a moderate takeover in Iran. They have helped the mullahs by increasing anti-Americanism. Perhaps the embargo has contributed to today’s unemployment rate of a third among Iranians in their twenties, which gave a focus for Ahmadinejad’s campaign.

American military threats also help the theocracy in its propaganda. The United States has invaded Iran’s neighbour Iraq. The mullahs can scarcely be thought paranoid if they arm Iran against aggression.

The US has already had to execute a modest policy U-turn. Bush, having first despised efforts by Britain, France and Germany to persuade Iran to forgo uranium conversion work in return for aid, later pledged to add US funds to the European initiative. As the president said: “We’re relying upon others because we’ve sanctioned ourselves out of influence with Iran.”

Even before Ahmadinejad became president, Iran announced that it would restart its programme to upgrade uranium and last week it put its Isfahan plant back into operation.

So the European Union’s approach has been no more successful than America’s. Now the Europeans seem as exasperated as the US and threaten to seek a United Nations security council resolution imposing international economic sanctions.

Securing agreement on that might not be easy. China might veto. Russia fears Iran’s nuclear ambitions, but would like to continue to sell nuclear kit for peaceful purposes. Anyway, the case against Iran is not clear-cut.

Under article IV of the Nuclear Non-Proliferation treaty (NPT) nations have “an inalienable right . . . to develop research, production and use of nuclear energy for peaceful purposes without discrimination”. Iran claims to be interested only in producing electricity. The Europeans argue that the Iranians have been deceiving the world for 20 years.

Securing sanctions would be a pyrrhic victory. Then Europe, too, would be “sanctioned out” and Iran would acquire new grievances with which to set its population seething.

So it is not just Washington that has the problem. Events have confounded optimists like me who thought that reformers would gain the upper hand in Iran and European leaders who believed that American obduracy was the main impediment to an accommodation with Tehran.

Maybe the Euro carrot has failed because the US stick is not credible. Bush has again raised the prospect of military intervention. But only a few paranoid liberals now think that an American attack on Iran is imminent. For nearly 2½ years the US military has been sinking into the quicksand of Iraq. America lacks the resources and willpower and public support for another war in the Middle East, at least while the two in which it is engaged remain unfinished. These days even neoconservatives do not talk much about invading Iran.

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