Houston -- The United States stands ready to engage with Iran on all of the issues of concern to both states whenever Iran is ready, Bruce O. Riedel, Special Assistant to the President and Senior Director for Near East and South Asian Affairs at the National Security Council, said April 2.

In remarks to the Baker Institute Symposium on Iran, Riedel said the U.S. is watching with interest signs of change within Iran since the inauguration of President Khatami.

"We have followed his words and actions closely. We watched closely his unprecedented CNN interview and noted its many positive statements. We followed his handling of the Islamic Summit in Tehran last December and its generally moderate tone. And we have noted with interest his efforts to strengthen the rule of law inside Iran," he said.

"Most of all we welcome President Khatami's decision to increase the level of interaction at the people-to-people level between our two countries," Riedel said, noting in particular the American wrestling team that was well received in Tehran last month and the Iranian wrestlers who will visit Oklahoma soon.

While acknowledging that people-to-people dialogue is useful, Riedel said "the issues that divide Iran and America must ultimately be addressed by their governments. ... We have no preconditions. We only insist that the dialogue be authoritative -- that is government-to-government."

Unfortunately, he said, "there are serious issues about Iran's behavior that still need to be addressed and need to be changed."

-- First are Iran's efforts to develop weapons of mass destruction and long range ballistic missiles. Despite its signature on the NPT and CWC, our information is crystal clear: Iran is seeking to develop an arsenal of nuclear, chemical and biological weapons and the missiles to deliver them.

-- Second, there remains Iran's dangerous connections with terrorist organizations around the world and particularly in the Muslim world.

-- Third, we remain particularly concerned by Iran's support for violent opposition to the Middle East peace process.

Riedel recalled President Clinton's Id al-Fitr message to Muslims around the world, in which he said, "Iran is an important country with a rich and ancient cultural heritage of which Iranians are justifiably proud. We have real differences with some Iranian policies, but these are not insurmountable. I hope that we have more exchanges between our peoples and that the day will soon come when we can enjoy once again good relations with Iran."

"We are patient and prepared to wait," to engage with Iran, Riedel said. "In the interim we will continue to do all we can to constrain and disrupt Iran's behavior in those areas that threaten our interests and the interests of our allies and friends."

Speaking briefly on the second side of the Dual Containment threat to the Gulf region -- Iraq -- Riedel said, "We continue to face a very serious challenge to the stability of the Gulf from Saddam's Iraq."

Although the crisis with Iraq over the issue of UNSCOM inspections has been resolved for now, he said, "the track record of the Saddam government suggests strongly that we need to remain vigilant and prepare for additional challenges from the Iraqi regime."

Following is the text of Riedel's speech, as prepared for delivery:

(Begin text)

"U.S. POLICY TOWARD IRAN"

It is a great pleasure to be here this afternoon to speak to this audience on the subject of U.S. policy toward Iran. It is a particular pleasure to have been invited by Ed Djerejian, a friend of many years and a colleague who taught me a great deal not just about the Middle East but about the business of diplomacy and government. Ed, I still remember fondly, our trip to the Gulf and our many meetings to discuss how best to advance American interests in that important part of the world.

The Gulf region has been recognized by every American President since Franklin Delano Roosevelt as an area of absolute vital strategic importance for the United States. Not only is it the energy storehouse of the world -- home to two thirds of the proven oil reserves of the globe -- but it is also the nexus where three continents come together and the home of three great religions. No where else in the world have U.S. military forces been more actively engaged in the last quarter century than here. From EARNEST WILL to DESERT SHIELD AND DESERT STORM to SOUTHERN WATCH, NORTHERN WATCH and DESERT STRIKE, this is where the vital interests of the United States have been defended most vigorously in the last two decades.

When President Clinton was elected in 1992 his first administration recognized immediately the strategic import of the region and recognized that there were two central threats posed to the stability and security of the area -- Iraq and Iran. We also recognized from the beginning that these threats could not be dealt with in isolation. Rather the United States needed to understand that dealing with the threat posed by one could not be done at the cost of neglecting the other. Consequently, we needed a policy designed to handle the unique threat each posed but which did so in a coordinated manner.

This was and remains the underlying premise of the policy known as Dual Containment. That policy understands the unique threats posed by these two states and seeks to deal with them both, not identically but in a coherent manner. Early on we rejected the option of trying to play one off against the other. That policy had been tried earlier and had resulted in the dangerous imbalance of power in the region that created the Iraqi invasion of Kuwait in August 1990.

We are now five years later and much has changed in the world. But much remains unchanged. We continue to face a very serious challenge to the stability of the Gulf from Saddam's Iraq. We have just concluded a prolonged confrontation with Iraq over the question of whether the UNSCOM inspectors would have full and unrestricted access to all sites in Iraq. That crisis has been resolved for now with a clear result -- Iraq backed down and allowed UNSCOM to have the access it needs to do its job. UNSCOM inspectors, including Americans, have inspected facilities previously off limits -- like the Iraqi equivalent of the Pentagon -- in the last few weeks. This is a significant accomplishment for American diplomacy backed by the threat of force.

During this crisis we also successfully expanded the UN's oil-for-food program substantially -- thus securing more help for the Iraqi people. Saddam's ability to use the humanitarian card to undermine sanctions has been reduced. This too is a victory for the international community.

But the track record of the Saddam government suggests strongly that we need to remain vigilant and prepare for additional challenges from the Iraqi regime. That will require a substantial-American military presence in the Gulf to enforce the no-fly zones and give our diplomacy the muscle it needs.

Today I want to focus our attention on the second threat in the Gulf region that President Clinton inherited in 1993 -- Iran. How has containment fared vis-a-vis Iran?

Our most important accomplishment here has been to put an international focus on Iran's actions and behaviors. Iran's support for terrorism, its efforts to acquire WMD and its sponsorship of violent opposition to the Middle East Peace Process have become an increasingly important part of the international debate since 1993.

Interestingly, virtually every significant player in the region has concurred with our assessment of the dangers posed by Iran. From Algeria to Central Asia, from Jordan to Pakistan, regional leaders have spoken out against Iranian machinations more and more in the last few years.

And we have had some success in other areas. Japan suspended its aid program for Iran, citing its support for terrorism, costing the Iranian regime over a billion dollars. Europe last spring announced an arms embargo. Russia has agreed to cap its arms dealings and take steps to control technology transfers with Iran. The Ukraine, Poland and other states have listened positively to our concerns about dangerous arms and technology transfers. China has moved away from cooperation with Iran's nuclear program and the sale of destabilizing conventional weapons.

Second, our effort to highlight Iran's rogue behaviors and increase the economic cost of such actions has forced Tehran to make difficult decisions about where to put its resources. In a country with $30 billion in foreign debt and half the population under 21, economic decisions about arms purchases can be influenced by outsiders. We have sought to make Iran think twice about how to spend its money. Hard pressed for foreign hard currency Iran has had to steadily cut back on its purchases of foreign weapons in this decade. Foreign exchange expenditures on arms have dropped from a high of $2.5 billion in 1991 to less than one billion dollars last year. That means the Iranian military threat to regional security and stability has been slowed and weakened. A threat still remains but it is not what Iran hoped for when it sought to rebuild its forces at the end of the Iran-Iraq war.

Now we have begun to see some signs of change within Iran's political process. The election of President Khatami last spring obviously marked a milestone in the history of the Islamic Republic. The Iranian people voted in impressive numbers for a change in Iran's course. We appreciate the significance of this development. President Clinton welcomed the election of Khatami and said only a few days after the votes were counted that he hoped it would begin a process of change that could end the estrangement of the two countries that began almost twenty years ago.

Since President Khatami's inauguration we have followed his words and actions closely. We watched closely his unprecedented CNN interview and noted its many positive statements. We followed his handling of the Islamic Summit in Tehran last December and its generally moderate tone. And we have noted with interest his efforts to strengthen the rule of law inside Iran. We hope this will lead to protection for all Iranians, including religious minorities like the Bahai. We hope it will also lead to an end to efforts to encourage Salman Rushdie's murder.

Most of all we welcome President Khatami's decision to increase the level of interaction at the people-to-people level between our two countries. Last month President Clinton met with the American wrestling team which had been so well received in Tehran and heralded their reception. We will welcome Iranian wrestlers in Oklahoma soon. And we support the efforts of think tanks on both sides to increase greater contacts between experts across a wide spectrum of disciplines. As the President said in his Id al-Fitr message to Muslims around the world, "'Iran is an important country with a rich and ancient cultural heritage of which Iranians are justifiably proud. We have real differences with some Iranian policies, but these are not insurmountable. I hope that we have more exchanges between our peoples and that the day will soon come when we can enjoy once again good relations with Iran."

We are prepared to move further. People to people dialogue is useful but the issues that divided Iran and America must ultimately be addressed by their governments. The United States has been open to a government-to-government dialogue with Iran since the Bush Administration. We remain interested in sitting down face-to-face with the Iranian leadership to discuss all issues of concern to both states. We have no preconditions. We only insist that the dialogue be authoritative -- that is government-to-government.

And, unfortunately, there are serious issues about Iran's behavior that still need to be addressed and need to be changed. Let me spend a few moments reviewing these.

First are Iran's efforts to develop weapons of mass destruction and long range ballistic missiles. Despite its signature on the NPT and CWC, our information is crystal clear: Iran is seeking to develop an arsenal of nuclear, chemical and biological weapons and the missiles to deliver them. As DCI Tenet has reported to the Congress, this effort is an aggressive one in which Iran has put considerable resources.

As I noted earlier, we have an equally aggressive effort around the world to try to discourage potential sources of technology and equipment for these programs from selling it with Iran. Our track record in doing so has been reasonably but not entirely successful. We will continue to do our utmost. The President frequently raises these issues himself at the highest levels to discourage such transfers.

Second, there remains Iran's dangerous connections with terrorist organizations around the world and particularly in the Muslim world. Despite promises that Iran opposes terrorism, we continue to see significant connections between Iran and numerous organizations that engage in terror including Islamic Jihad, Hizballah and Hamas. Iran still provides such groups with arms, money, training and safe haven. In Algeria, Egypt, Lebanon and many other states, Iran gives aid and assistance to groups engaged in acts of brutal violence against civilians. That is why so many of Iran's neighbors remain so leery of Iranian intentions despite the changes brought by President Khatami.

Third, we remain particularly concerned by Iran's support for violent opposition to the Middle East peace process. We have noted Iran's more moderate declaratory policy toward the Palestinian Authority and the more flexible approach it took in the Islamic Summit. But we remain deeply concerned about it's continued connections and support for the most violent enemies of the process. Its words must now be matched by deeds.

So in any future dialogue with Iran we will want to discuss these issues. And we will continue to discourage other countries from engaging with Iran as a normal partner until we all see changes in Iran's behavior. In this regard we will enforce the laws passed by Congress intended to encourage other states to control technology transfers to Iran and to exercise great care and discipline in what they trade with Iran.

The United States and Iran have many shared interests and concerns. We have a mutual interest in seeing the Gulf be open to the unrestricted flow of its energy resources. We have a common interest in seeing stability in the region so that its peoples can focus their attention on human development, not weapons development. We have a common interest in seeing the Saddam regime in Iraq contained and disarmed by the UN inspectors. We have a common interest in seeing an Afghanistan at peace with itself and its neighbors.

The United States stands ready to engage with Iran on all of these issues and others whenever Tehran is ready. We are patient and prepared to wait. In the interim we will continue to do all we can to constrain and disrupt Iran's behavior in those areas that threaten our interests and the interests of our allies and friends.

(End text)