In the race between international sanctions and Iranian centrifuges, the centrifuges are winning, leaving the United States with little time and fewer options for preventing a nuclear Iran, witnesses told a Senate Homeland Security and Governmental Affairs panel Thursday.

Thomas R. Carper, D-Del., chairman of the Federal Financial Management Subcommittee, called the hearing to examine what the Bush administration has done and what the next administration could do to defuse the potential powder keg of a nuclear Iran, and subsequently, nuclear proliferation across the Middle East.

Iran currently has 3,000 centrifuges in operation, is installing 6,000 more at its nuclear reactor in Natanz, and plans to expand that number to 54,000 ultimately.

“I believe the way to stop or at least mitigate Iran’s enrichment activities is to present Iran with an enhanced set of carrots and sticks . . . in order to change its cost-benefit analysis of the issue,” Carper said. “Hammering out those incentives and disincentives is the challenge before us.”

The best option, witnesses said, would be to intensify U.S. and international diplomatic efforts while laying the groundwork for the containment of Iran’s nuclear program.

Without such efforts, Iran would be emboldened to use terrorism abroad and repression at home to strengthen its international position, they said. And although a military option should remain on the table, actions by the United States or Israel against Iranian nuclear targets probably would spark widespread Iranian retaliation, lack international support, and result in only a brief delay Iran’s nuclear development program.

“Given the path that we’re on right now, next year Iran is going to be a nuclear power,” said Dennis Ross, counselor and Ziegler Distinguished Fellow at the Washington Institute for Near East Policy.

Between the strategies of containment and military action was a third way, Ross said: leveraging Iran’s economic vulnerabilities. This would mean cutting the country’s economic lifeline before beginning the diplomatic engagement.

Iran’s vulnerabilities include its declining oil output, which is falling by more than 300,000 barrels a day below the country’s OPEC quota, Ross wrote in his submitted testimony. Oil exports make up 85 percent of Iran’s export income and half of the government’s total revenues, but require investment and technological help from the outside to sustain.

Thus, cutting off credit and investment in the oil sector could exacerbate Iran’s problems, such as its high inflation and unemployment. Combining that with sanctions that have contributed to raising commodities prices by as much as 50 percent inside Iran could lessen the Mullahs’ power, force serious rationing, and provoke a domestic reaction against the current regime, he wrote.

However, the 2007 National Intelligence Estimate has done tremendous damage to efforts to tighten the economic noose, witnesses said. That estimate found Iran had suspended its nuclear-weapons development program in 2003 but continued the production of fissile material and ballistic missile delivery capabilities. The greatest challenge to producing a nuclear weapon is the production of fissile materials.

The result of the estimate has been to sow confusion in the international community, setting back France’s initial efforts to spearhead international sanctions within the European Union that would have gone beyond the four sanctions imposed by the U.N. Security Council since 2006, including sanctioning billions in credit guarantees that some European governments continue to give companies doing business in Iran, Ross wrote.

One way to increase the pressure on Iran, he said, would be to pressure the Saudis to stop providing strategic petroleum reserves to China or continuing China’s massive investments in Saudi Arabia’s petrochemicals industry, which is greater than its investment in Iranian oil. This might convince China to join the international community in isolating Iran, Ross told the subcommittee.

The current path of offering incentives while imposing economic sanctions until Iran agreed to suspend all enrichment, most witnesses agreed, was not working or moving too slowly to prevent a nuclear Iran. Some, including Sens. Arlen Specter, R-Pa., and Dianne Feinstein, D-Calif., urged that in addition to sanctions, the United States engage in direct talks with Iran without the precondition that Iran first suspend its enrichment program.

Specter said part of what was needed in the dialogue was greater “civility and courtesy.”

“I think it is a great act of foolishness to try to tamper with somebody else’s pride, and I think that is what we do with Iran when we take the proposition that we will engage in bilateral talks on the condition that they cease to enrich uranium,” he said. “Well, that’s the object of discussion, so how in good faith can there be the insistence that the other party make the concessions sought in the dialogue, in the negotiations, as a precondition to meeting? It seems to me it is exactly wrong. And I have asked the secretary of State, the deputy secretary of State, on the record that question recently and got a very unsatisfactory answer.”

State Department officials who testified at the hearing explained their reasons for pursuing their approach for multilateral sanctions.

The “dual-track approach” involves escalating the pressure on Iran through U.N. Security Council sanctions while offering “a generous package of incentives that cover the gamut of political, economic, technological and social benefits that would accrue to the Iranian people were the regime to resolve international concerns with its nuclear activities,” said Patricia McNerney, principal deputy assistant secretary of State for the Bureau of International Security and Nonproliferation.

“While we believe we are having an impact, we have yet to achieve our specific objective of persuading Iran to step off its current nuclear course,” McNerney said, but to take the precondition off the table would risk Iran using the negotiations as a delay tactic while continuing to enrich uranium.

Amb. Jeffrey Feltman, principal deputy assistant secretary of State for the Bureau of Near Eastern Affairs, echoed her statements.

“We’re doing this multilaterally because the danger is multilateral,” he said.

Jim Walsh, a research associate at the security studies program at the Massachusetts Institute of Technology, co-authored a proposal with former ambassadors Thomas Pickering and William Leurs that would create an internationally owned and operated program of enrichment on Iranian soil, which would provide Iran’s domestic energy needs and monitor its reactors, removing the secrecy involved with the program and reducing fears of its use for building nuclear weapons.

Walsh testified that he thought the proposal would have a better chance of achieving nonproliferation objectives than other policy alternatives, such as the long-term solution of soft regime-change, military action, containment or direct, unconditional talks.

“Simply put, multi-lateralization provides more protection than the status quo, i.e., a purely national program subject to traditional safeguards and the occasional voluntary suspension of enrichment activity,” Walsh wrote in his submitted testimony. “Compared to the alternatives, multi-lateralization would reduce the risks of proliferation through international management and the deterrence that comes with having more ‘eyes on the ground.’ ”