THE FORGOTTEN STORY – AT 10:37 A.M. ET:  With all our focus on terror, we've pushed aside a story that is even larger, essentially the collapse of our Iran policy.  The New Year's deadline for Iran to show progress in negotiating its nuclear program has come and gone, with no punishment, and Washington is now talking of softer, "targeted" sanctions, rather than the "crippling sanctions" that were all the rage only a month ago.  Iran has noticed:

Iranian President Mahmoud Ahmadinejad expressed continued defiance to the threat of further sanctions on his country on Saturday, saying the Islamic Republic will not be deterred from pursuing its nuclear program.

"They issued several resolutions and sanctioned Iran," Ahmadinejad said in a speech translated by the AFP news agency. "They think Iranians will fall on their knees over these things but they are mistaken."

"We are not interested in conflicts [but they] are continually demanding things," he said. "They should not think they can put up obstacles in Iranians' way ... the government will whole-heartedly defend Iran's rights and will not back down one iota."

Iran even escalated its demands:

Meanwhile, in an announcement seemingly in line with his confrontational attitude towards Western nations, the hardline president has ordered the formation of a team to study the damages the country suffered from the 1941 Allied invasion in order to demand compensation.

Ahmadinejad said Iran suffered immensely after it was invaded by Britain and the Soviet Union during World War II despite its declared neutrality and was never compensated.

And...

Ahmadinejad also warned that Iran may also demand compensation for the damages it suffered during World War I, the Western support for the former Pahlavi Dynasty and its hostility towards Iran since the 1979 Islamic revolution.

COMMENT:  We're being laughed at.  This is what Obama gets for his naive "outreach" policy.

January 9, 2010