John Thomson: This way, Mr Bush, you could go out a statesman

A dangerous tit for tat looms as negotiations stall on Iran's refusal to climb down on the nuclear issue, yet the positions of Washington and Tehran are not that far apart. The US president should agree to hold talks without pre-conditions

Tit for tat is a game that tends to get rough and out of hand. So Iranian missile launches last week answering Israeli practice air attacks in June are worrying. There is more to come.

President Bush is widely believed to have assured supporters that he will not leave office without having dealt with Iran. This mean's "teaching Iran a lesson", perhaps shaking the regime. Some US commentators suggest the regime is already shaking and will have to bow to further pressure. Tehran is keen to show that this analysis is wrong and that if attacked its riposte will be swift and devastating.

Iran, being in breach of Security Council resolutions, is on the wrong side of international law. The five permanent members of the Security Council, plus Germany – the "5-plus-1" – will isolate Iran through further UN resolutions. Some voices may declare a blockade is needed to assert the will of the international community. Iran's response may scare oil consumers and increase the oil revenues, which Tehran can use to bribe people flouting UN sanctions and to subsidise prices for its deprived population.

Israelis, shocked by their failure to win the 34-day war against Hizbollah and worried by the weakness of their government, fear that Iran intends to attack them. This is an irrational fantasy, but has spawned a political reality in giving rise to talk about pre-emptive military action. The visit to Israel last week of Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, could be interpreted as US-Israeli coordination for such an attack. More likely, Mullen warned Israel not to attack – but the White House will not admit this.

Rumours allege that Israeli planes have practised in Iraqi air space and landed at US air bases minutes from Iran. If Tehran believes them, there could be consequences. US claims that Iranian supplies are going to Iraqis who are killing US troops evoke the counter claim that America is supporting dissidents in Iran and (with Britain) sheltering drug-dealing terrorists in Afghanistan.

What began in 2003 as a legitimate attempt to persuade Iran to desist from its hitherto secret enrichment programme has snowballed into a confrontation between the US and Iran embroiling pretty much the entire Middle East, worrying Russia and China and potentially affecting the daily lives of Europeans.

Tit for tat is likely to continue and, unchecked, could lead to wars nobody wants. Is there a way out? Can Europeans do something effective? The answer to both questions is "Yes".

That the problem is no longer just about Iran's nuclear ambitions but extends to the entire region is accepted by both sides. Each has a package proposal covering the whole range of problems. The Iranian proposal was delivered to the EU's foreign policy chief, Javier Solana, and the foreign ministers of the 5-plus-1 on 13 May. Their proposal was handed to the Iranian Foreign Minister, Manouchehr Mottaki, on 14 June.

These two proposals offer a way forward. Each covers big issues so briefly that it is hard to be sure exactly what they mean; they are more like agenda items than detailed proposals. But they are the better for that.

Mottaki told a few of us over dinner in New York last week that Solana had assured him the Iranian package could be part of the agenda for substantive negotiations between Iran and the 5-plus-1. Obviously, the other part of the agenda should be the package proposed by the 5-plus-1 themselves.

Both proposals include negotiations not only on nuclear matters but also on political, economic and security issues. Each contains some items not in the other. For instance, the Iranians will not object to civil aviation or means of dealing with humanitarian disasters. Nor, presumably, will the 5-plus-1 jib at discussing terrorism, democracy and drugs.

Offers to negotiate do not necessarily imply commitment to reach agreement. Both packages clearly have immediate tactical goals in view. But it would be wrong to suppose they are wholly insincere.

In three hours of discussion, Mottaki convinced me that while there was no change in the basic Iranian position on the nuclear issue, there was a change in tone and intention as regards the general relationship with the West. Iran, I judge, is ready to make some compromise agreements (as yet unspecified) on Middle Eastern issues that worry the West. And on the nuclear issue it is ready to compromise to the extent of putting its enrichment-related facilities under the control of an international consortium – including, for example, France, Germany and the UK – which would then operate a modern, commercially oriented business producing nuclear fuel in Iran for sale globally.

This is not what the 5-plus-1 are asking for, but in my view it is the best that is obtainable, and so long as it remains in force it precludes Iran from making a nuclear weapon. Early discussion of this idea would get the two sides into a negotiation that could expand to cover all the items in the two packages.

However, there is a snag. The 5-plus-1 continue to insist substantive negotiations must await the suspension, for an indefinite period, of the Iranian enrichment programme. In short, negotiations are hostage to a prior climbdown by Iran on the nuclear issue.

This is unlikely. In my view, the change in Iranian tone and intentions is due to increasing confidence that its influence in the Middle East is equal to that of the US. Hence negotiations, it supposes, will be based on mutual respect.

But the snag may be temporary. Senator Barack Obama says that under his administration negotiations could begin without the precondition about suspension. The Iranians are playing for time.

So by the afternoon of 20 January 2009, when the new US president takes office, negotiations may be possible. Meanwhile, there will be much dangerous tit for tat. Europeans should make it clear to their governments that they are running too big a risk for too small a prize. Let negotiations begin without pre-conditions. Now, President Bush, to propose that yourself would be truly statesmanlike.

Sir John Thomson, a former UK Permanent Representative at the UN, is currently a research affiliate at MIT