What to do about Iran? The country is in the throes of a protracted and profound internal struggle whose outcome no one seems able to predict. The plight of the reformers is real and getting worse as the authorities clamp down on dissent, arrest protesters and harass their leaders with increasing brutality.

The difficulty of dealing with the regime, and knowing how best to support its people, is made all the more difficult by its position in the region and its nuclear ambitions. It's hard enough trying to decide how to treat with a regime such as Burma's, where our interests are fairly distant. With Iran you are approaching a country whose future and whose ambitions could reshape the region and even bring on war.

The problem, however, may lie more in the question than the answer. We've done "doing something" about difficult regimes and achieved little but harm. Castro, Mugabe, the Sudanese government and the Burmese military regime still stand, while as for our invasion of Iraq, the least said the better. It's not ours to "do something" about Iran. We expended any goodwill we might have had by joining Bush in his ill-fated attempt to reshape the Middle East, making it all too easy for President Ahmadinejad to paint us in the colours of a colonial meddler reverting to type.

There's no shortage of voices here, as indeed within Iran, calling for us to condemn the Iranian regime in the strongest terms, to declare it a pariah among nations, to load it with sanctions and even to cease contact altogether. Life would be so much easier if one could be morally righteous in one's dealing with other countries and leave it at that. But quite aside from the sheer hypocrisy of singling out Iran for punishment while totally ignoring China's much greater breaches of human rights, just what good would isolation do?

Sanctions rarely work, as we know from Zimbabwe and Burma and, for that matter, pre-invasion Iraq. Indeed as the Iraq example showed, they actually serve to entrench autocratic regimes in power by enabling them to monopolise such goods and services as do come into the country. The sanctions already imposed on Iran by the US Congress have greatly increased the profits of the Revolutionary Guards, who now control a major share of the country's economic activity. Doubling them up, as the US and Europeans are now urging, will only increase the regime's control of resources and hence power.

The same with isolation. It's done nothing to undermine President Mugabe or Kim Jong-il in North Korea, quite the opposite. Nor is it easy to cease relations with a country whom we are desperately anxious to engage on the subject of its nuclear ambitions, its interests in Afghanistan and Iraq, and its position as backer of Hamas and Hizbollah. Nuclear need must not override moral imperatives, say the callers for confrontation with Tehran. But nuclear issues are a need, and an urgent one if we are to avoid an arms race through the region and possible pre-emptive action by Israel.

Whatever one's feelings about President Ahmadinejad and the legitimacy of his regime, the world cannot afford to pass up a chance of constructive negotiations over nuclear issues – and there still is a chance for all that Israel and the right in the US say – because of distaste for the people with whom we are talking.

The collapse of the Soviet Union 20 years ago gave the West too seductive a view of the inexorable march towards freedom and democracy. It was not that simple, and we didn't do that much to help. The major changes were wrought in occupied countries. Those like Ukraine, with large Russian populations, or the Central Asian Republics in need of Russian support, have moved a lot less swiftly down that path. We could do far more to support occupied peoples – the Palestinians and the Tibetans spring to mind – but we don't seem inclined to.

Iran is a sovereign country, and a proudly nationalistic one. Outside intervention quickly brings back memories of foreign intervention and Western support for Iraq in the Iran-Iraq war. It is also a peculiarly difficult country to read, thanks partly to the opaqueness of its power structure. The current struggle embraces not only the obvious groups of students and professional classes seeking greater freedom but also a battle within the theocratic elite between conservatives who came to power in the Islamic Revolution and the younger more militant groups forged by the Iran-Iraq war.

The rural population, which has been the recipient of President Ahmadinejad's populist policies in the past, now seems more restive under the tightened economic circumstances and the withdrawal of subsidies under way. So far workers and the urban population have not joined the so-called "Green Movement" for reform, as they did when the Shah fell, but then the country has a large majority of under-21s who could jump either way – towards oppression or revolt.

The trouble with most comment is that it is suffused by what people on the outside, and the exiles, want to happen rather than what they think will. Opponents of Tehran's policy on nuclear, Palestine and the region wish for a velvet revolution that would produce a pro-Western government which would reverse all those plans. But even if the reformers eventually prevail, it is still far from certain that they would overthrow the whole theocratic system or act within the tenets of an Islamic revolution which most people still subscribe to. Nor is it sure, however devoutly it may be wished for, that the reformists have the numbers to prevail – although it is my feeling that they will.

The one near-certainty is that, if changes comes, it will be from within the country not without and that when, and if, it comes it cannot be seen to be at the behest of the West and to the detriment of Iran's independent standing. Our policy should be what it should have been these past 10 years – to forget all the nonsense of sanctions and forcing Tehran to the table, to keep negotiating in good faith and with due understanding of its imperatives, and to support reform by keeping communication open, constantly reiterating our concern and providing a refuge for any who need it.

a.hamilton@independent.co.uk