When will we have "exhausted diplomacy"?

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With respect to Iran, the Bush and Israeli administrations have been stating this phrase robotically for 6 years, as a means of keeping the liberal media, UN idealists, and European pacifists at bay. Some of this has to do with the ferocious response from these entities with respect to the Iraq war.

The question I have, is what are the goalposts here? Bush and Israel have never clearly defined at what point "diplomacy," as if such a thing could ever really be used with a fascist dictatorship, would no longer be an option.

I think that pursuing this avenue was suitable for a short time to placate the above interests, but at this stage since Iran has now been exposed for attempting to develop a smaller-footprint nuclear payload to fit onto its most advanced rocket design, in addition to all of the other evidence uncovered that there is no further diplomatic road on which to travel. Iran is refuting that this most recent evidence is even legitimate, not even bothering to give credit to the questions raised.

I would believe most reasonable people were happy to ride along with Bush so long as the "diplomatic" efforts had a clearly defined endgame, but one would have to feel that the process has pretty much been exhausted. 3 rounds of sanctions have already passed, and Iran has shown nothing but contempt for the widely recognized diplomatic and legal mechanisms used to obtain preferable political outcomes.

It would seem that Iran would prefer to delay and obfuscate as long as it takes until it has mastered uranium enrichment and weapons development.

The Bush administration needs to explain to the public how it defines this "diplomacy," and at what point it will no longer pursue it as a realistic option.