TONY BLAIR held out the prospect last night of a new “partnership” with Iran, but only if it was prepared to help in the Middle East peace effort, stop supporting terrorism in Iraq and give up its quest for nuclear weapons.

Calling for fresh dialogue with Tehran and Syria, the Prime Minister also gave warning that the alternative to their becoming engaged in the process was isolation.

He reminded Iran that its stock market had lost a third of its value in the past year and foreign credit was increasingly hard to come by.

The offer of dialogue would have seemed unthinkable a few months ago, but was seen as an attempt to exploit the greater readiness in Washington to talk to Iraq’s neighbours — states once named as part of the “axis of evil” by President Bush.

Mr Blair explicitly ruled out military action against Iran. However, he accused Tehran of backing extremists and terrorists in Iraq, Lebanon and Palestine in opposition to international efforts to block its programme to acquire nuclear weapons.

Addressing the Lord Mayor’s banquet at Guildhall, London, Mr Blair spoke of Iran’s “genuine, if misplaced” fear that the US sought a military solution in Iran. It did not.

Downing Street denied suggestions that Britain and America were going “cap in hand” to Iran and Syria. It said that instead it was offering the two countries a “strategic choice” with heavy consequences, including being put “beyond the pale” of the international community, if they took the negative path.

Both Downing Street and Des Browne, the Defence Secretary, emphasised that policy was not being redrawn after Mr Bush’s reverses at the polls last week. Mr Browne said that change “has been under way for some time now”.

The speech came after two Royal Marines and two soldiers were killed when their boat was blasted by a makeshift bomb in southern Iraq on Remembrance Sunday.

Mr Blair condemned the attack as “a cruel and wicked reminder that this terrorism is dedicated to one end: to stop democracy flourishing in Arab and Muslim countries; to foster sectarian division; to drive out the possibility of reconciliation between people of different faiths”.

He put the blame for the violence in Iraq squarely on outside forces — whether al-Qaeda or Iran — supporting an extremist minority within the country. “Its purpose is now plain: to provoke civil war. The violence is not therefore an accident or a result of faulty planning. It is a deliberate strategy.

Iran was backing the most extreme elements of Hamas in Palestine, Hezbollah in Lebanon and Shia militia in Iraq in the hope of exploiting “pressure points” in the region to thwart international pressure over its nuclear ambitions, Mr Blair said.

He added: “It is a perfectly straightforward and clear strategy. It will only be defeated by an equally clear one: to relieve these pressure points one by one and then, from a position of strength, to talk.

“Offer Iran a clear strategic choice: they help the Middle East peace process, not hinder it; they stop supporting terrorism in Lebanon or Iraq; and they abide by, not flout, their international obligations.

“In that case, a new partnership is possible. Or alternatively they face the consequences of not doing so: isolation.”

“A major part of the answer to Iraq lies not in Iraq itself but outside it, in the whole of the region where the same forces are at work, where the roots of this global terrorism are to be found, where the extremism flourishes, with a propaganda that may be totally false; but is, nonetheless, attractive to much of the Arab street.

“That is what I call a ‘whole Middle East’ strategy.”

Such a strategy should start with efforts to resolve tensions between Israel and Palestine, which are “the core” of the troubles afflicting the whole region, he said. “We should then make progress on Lebanon. We should unite all moderate Arab and Muslim voices behind a push for peace.”

Click here for today's cartoon on Blair's Middle Eastern agenda

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