Iran is developing nuclear weapons. Yet when President Putin of Russia recently peered into the soul of Iran’s security chief, evidently he saw nothing but blue skies and butterflies; somehow, he was reassured that Iran is not working on building its own nukes. As a result, Moscow and Tehran this week are concluding an agreement to provide nuclear fuel for Iran’s controversial Bushehr reactor, and the world is a much more dangerous place. And this may call or firm U.S. steps against Russia as well as Iran.

Mr. Putin is not alone in seeing what he wants to believe, particularly when money is involved. Britain, France, and Germany (the “EU-3”) hope new trade opportunities will bribe Iran toward good behavior, while ensuring that Europe’s billions of dollars of investment in Iranian oil and gas will flow unimpeded regardless of the outcome. And for the first time in two years, Iran’s nuclear aspirations are not even on the agenda of the International Atomic Energy Agency, or IAEA, Board of Governors meeting that begins February 28, which has for two years resisted all attempts to refer Iran’s violations to the U.N. Security Council.

Hallucination, hope, and indecision are not strong foundations for international security. Unless the world intervenes more urgently and effectively than it has, Tehran will become the first active state sponsor of terrorism to acquire the greatest instrument of terror and destruction of all.

The IAEA has documented that Iran acquired designs, equipment, and facilities to produce nuclear-weapons-grade uranium and plutonium from the same nuclear black-market that supplied Libya, and experimented with trigger material for a nuclear bomb, all under the guise of developing “peaceful nuclear energy” permitted under the Nuclear Nonproliferation Treaty, or NPT. There is every reason to believe that Tehran has acquired actual bomb blueprints, as Libya did.

Iran sponsors terrorism as state policy, funding numerous groups (including Hezbollah) that murder and maim the innocent, including American citizens. Imagine, then, this terrorist state armed with nuclear weapons. Even if it did not put these destructive materials up for sale, a nuclear armed Iran would terrorize and destabilize the entire Middle East. Other countries already threatened by Iran, such as Saudi Arabia, would undoubtedly pursue their own nuclear options, if they haven’t already begun.

We must keep the pressure on Iran, as we did on Libya, to step off this most dangerous path. I am convinced that the EU-3’s “more carrots, no stick” approach will fail as long as they withhold only future European trade and investment. Europe and Asia invested billions into Iran’s oil and gas sectors even as Iran was developing its nuclear capabilities and flouting international safeguards. Lesson learned? The West can be bought with oil and gas, and Tehran can continue building the Persian Bomb without risk to investments already made. The future? Europe and Asia will quickly get over the advent of an Iranian nuclear bomb, cut their nonproliferation losses, and rush to offer the new trade carrots anyway.

We must change Tehran’s calculations. In May 2004, the House of Representatives overwhelmingly passed a resolution that I wrote with Rep. Henry Hyde condemning Iran’s nuclear program and calling on our friends and allies to refrain from investing in Iran’s oil and gas fields. We have recently seen promising signs that some are heeding this call; British Petroleum has foresworn new investment in Iran, and General Electric has redirected its European subsidiaries from trade with Tehran. Even Halliburton has had second thoughts about its Iranian investments.

America must be more assertive with our friends and allies who mistakenly believe that continued trade and investment will lure the ayatollahs away from their multi-year quest for nuclear weapons. European and Asian governments must immediately suspend or terminate their existing Iranian investments. The IAEA must again publicly confront Iran and report the issue to the U.N. Security Council at the first opportunity.

For its part, the Security Council should require U.N. members to reject all investment and non-humanitarian trade with Iran until Tehran has verifiably given up its nuclear fuel and weapon material production capabilities and further affirm that Iran has forfeited all rights under the NPT to possess nuclear material production facilities.

And if Russia follows through on its new fuel supply agreement, the president must, and the Congress will likely insist, that Russia be sanctioned under the Iran Non-Proliferation Act.

The Ayatollahs of Terror must not be allowed to acquire nuclear weapons under any circumstances. It is past time to isolate Iran economically and diplomatically. A nuclear Iran threatens us all.

Mr. Lantos is the ranking Democrat on the House International Relations Committee, the co-founder and co-chairman of the Congressional Human Rights Caucus, and the co-author of the Iran-Libya Sanctions Act.