WASHINGTON — 

Germany — a pivotal player among three European nations to rein in Iran's nuclear program over the last two-and-a-half years through a mixture of diplomacy and sanctions supported by the United States — notified its allies last week that the government of Chancellor Angela Merkel refuses to support the imposition of any further sanctions against Iran that could be imposed by the U.N. Security Council.

The announcement was made at a meeting in Berlin that brought German officials together with Iran desk officers from the five member states of the Security Council. It stunned the room, according to one of several Bush administration and foreign government sources who spoke to FOX News, and left most Bush administration principals concluding that sanctions are dead.

The Germans voiced concern about the damaging effects any further sanctions on Iran would have on the German economy — and also, according to diplomats from other countries, gave the distinct impression that they would privately welcome, while publicly protesting, an American bombing campaign against Iran's nuclear facilities.

Germany's withdrawal from the allied diplomatic offensive is the latest consensus across relevant U.S. agencies and offices, including the State Department, the National Security Council and the offices of the president and vice president. Under Secretary of State for Political Affairs Nicholas Burns, the most ardent proponent of a diplomatic resolution to the problem of Iran's nuclear ambitions, has had his chance on the Iranian account and come up empty.

Political and military officers, as well as weapons of mass destruction specialists at the State Department, are now advising Secretary of State Condoleezza Rice that the diplomatic approach favored by Burns has failed and the administration must actively prepare for military intervention of some kind. Among those advising Rice along these lines are John Rood, the assistant secretary for the Bureau of International Security and Nonproliferation; and a number of Mideast experts, including Ambassador James Jeffrey, deputy White House national security adviser under Stephen Hadley and formerly the principal deputy assistant secretary for Near Eastern affairs.

Consequently, according to a well-placed Bush administration source, "everyone in town" is now participating in a broad discussion about the costs and benefits of military action against Iran, with the likely timeframe for any such course of action being over the next eight to 10 months, after the presidential primaries have probably been decided, but well before the November 2008 elections.

The discussions are now focused on two basic options: less invasive scenarios under which the U.S. might blockade Iranian imports of gasoline or exports of oil, actions generally thought to exact too high a cost on the Iranian people but not enough on the regime in Tehran; and full-scale aerial bombardment.

On the latter course, active consideration is being given as to how long it would take to degrade Iranian air defenses before American air superiority could be established and U.S. fighter jets could then begin a systematic attack on Iran's known nuclear targets.

Most relevant parties have concluded such a comprehensive attack plan would require at least a week of sustained bombing runs, and would at best set the Iranian nuclear program back a number of years — but not destroy it forever. Other considerations include the likelihood of Iranian reprisals against Tel Aviv and other Israeli population centers; and the effects on American troops in Iraq. There, officials have concluded that the Iranians are unlikely to do much more damage than they already have been able to inflict through their supply of explosives and training of insurgents in Iraq.

The Bush administration "has just about had it with Iran," said one foreign diplomat. "They tried the diplomatic process. China is now obstructing them at the U.N. Security Council and the Russians are tucking themselves behind them.

"The Germans are wobbling …There are a number of people in the administration who do not want their legacy to be leaving behind an Iran that is nuclear armed, so they are looking at what are the alternatives? They are looking at other options," the diplomat said.

Vice President Cheney and his aides are said to be enjoying a bit of "schadenfreude" at the expense of Burns. A source described Cheney's office as effectively gloating to Burns and Rice, "We told you so. (The Iranians) are not containable diplomatically."

The next shoe to drop will be when Rice and President Bush make a final decision about whether to designate the Iranian Revolutionary Guard Corps (IRGC) and/or its lethal subset, the Quds Force, as a terrorist entity or entities. FOX News reported in June that such a move is under consideration.

Sources say news leaks about the prospective designation greatly worried European governments and private sector firms, which could theoretically face prosecution in American courts if such measures became law and these entities continued to do business with IRGC and its multiple financial subsidiaries.

If the Bush administration moves forward with such a designation, sources said, it would be an indication that Rice agrees that Burns' approach has failed. Designation of such a large Iranian military institution as a terrorist entity would also be seen, sources said, as laying the groundwork for a public justification of American military action.

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