The policy shift, which scuttles a five-year effort in which the United States tried to explore ways to work with Khatami and encourage a reform agenda in Iran, follows an intensive review within the administration over whether to adopt a harder line toward a government President Bush has labelled part of the "axis of evil", the paper added.

Khatami took office in 1997 and was re-elected last year by a wide majority. He has been viewed as more open-minded to relations with the United States and to opening up Iran to democratic reforms than Iran's supreme leader, Ayatollah Ali Khameneh’i, and his fellow clerics. The Clinton and Bush administrations, until now, had sought t probe whether Khatami would prove to be a fruitful alternative to the fundamentalists.

A senior administration official said Bush has concluded with his senior foreign policy advisers that Khatami and his supporters in the government "are too weak, ineffective and not serious about delivering on their promises" to transform Iranian society. Instead, the official said, "we have made a conscious decision to associate with the aspirations of Iranian people. We will not play, if you like, the factional politics of reform versus hard-line".

Bush signalled the change publicly in a strongly worded presidential statement in which he praised large pro-democracy street demonstrations in Iran. The shift cheered foreign policy experts who had urged a tougher approach toward Tehran and was a setback for the State Department, which had spearheaded efforts to engage the Khatami leadership.

In the statement, Bush said "uncompromising, destructive policies have persisted" in Iran despite recent presidential and parliamentary elections that have brought reform advocates to power. He accused Iranian leaders and their families of continuing "to obstruct reform while reaping unfair benefits" and demanded that the government listen to the Iranian people, who he said have "no better friend than the United States."

Bush approved the statement earlier this month after pro-democracy protesters and Iranian security forces clashed at the demonstrations, and a top Iranian cleric, Ayatollah Jalaleddin Taheri, resigned his post to denounce what he called the "incompetence of the authorities and the failure of the political structure."

Though all senior Iranian clerical rulers, including Khameneh’i and Khatami have denounced Bush's statement, but some reformers have welcomed it, considering it a dramatic U turn from earlier statement labelling Iran as forming an axis of evil with Iraq and North Korea.

Although virtually unnoticed in the United States when issued July 12, Bush's statement spawned fierce complaints from Iranian officials and resulted in government efforts to organise anti-U.S. demonstrations in Tehran last week, criticising Bush for interfering in Iran's internal affairs.

Since Bush grouped Iran with Iraq and North Korea as members of the "axis of evil" in his State of the Union speech in January, there has been an intense debate within the administration over how hard to signal its support for the reform movement.

With signs that the demonstrations were gathering momentum, the debate this month swung toward the approach urged by the National Security Council and Pentagon, taking the State Department by surprise, officials said.

"The White House kind of surprised a few people with their activity on this", a State Department official said.

"This statement is evidence that they've [the State Department] been losing that debate," said Michael Rubin, a visiting fellow at the American Enterprise Institute who supports the administration's new emphasis. "Engagement sounds good in theory, but in the case of Iran, it does not work in practice".

But Martin Indyk, a former U.S. ambassador to Israel now at the Brookings Institution, said the new approach carried significant risks. "This may help those we are trying to harm and harm those we are trying to help", he said, because reformers may be tagged as agents of the United States.

"The same principle applies to Iran as the Palestinians", Indyk said. "We should be careful about leaving the impression that we intend to determine who the leadership will be."

Relations between the United States and Iran have been a key issue in Iran since the shah was overthrown in 1979. Earlier this year, Khameneh’i declared that talks with "the Great Satan" amounted to treason, and the Iranian justice ministry announced it would try journalists who promoted dialogue with the United States.

"The United States is concerned about Iranian politics, both internally and internationally, with the hard liners blocking efforts towards changes at home and preventing in normalisation in relations with Washington", he told the Persian service of the BBC on 23 July.

Some administration officials believe the reaction inside Iran to the statement is evidence it is having its desired effect. "It has increased tensions within the regime", an official said, citing a dispute over the weekend between the Republican Guards and reformers over whether the democracy advocates were "pawns" in a U.S. plan to invade Iran.

However, the White House said on Tuesday that it would keep trying to find ways to work with Iranian government even though a five-year policy of identifying with moderates has produced few visible results.

The aim is to support the Iranian people in their universal quest for freedom and human rights, White House spokesman Ari Fleischer said.

So far, there was no official reaction from Iranian authorities. ENDS KHATAM ABANONED 23702

Editor’s note: Written by Mr. Glenn Kessler, the above article was published by the Washington Post on 22 July

Highlights are from IPS