Hardline Iranian students stormed the British embassy in Tehran this morning, smashing windows and burning the British flag. The students, protesting the latest British sanctions imposed on the Islamic Republic as a result of its nuclear defiance, demanded Tehran break relations with London. Rather than protect the embassy, Iranian security forces charged with its protecting simply stood aside suggesting official endorsement of the act.

The attack on the embassy follows the Iranian parliament’s decision on Sunday to downgrade relations with Great Britain and expel the British ambassador. That vote was 179 in favor of downgrading relations, and four against with 11 abstentions. Importantly, the four parliamentarians who voted against the measure felt that the Iranian government should go even further and sever relations altogether.

According to Iran’s semi-official Fars News Agency, the radical students carried placards with photographs not only of Majid Shahriari, an assassinated Iranian nuclear scientist, but also Qassem Suleimani, the head of the Qods Force.

Suleimani is one of the Islamic Republic’s darkest figures responsible, according to American diplomatic cables, for running terror networks across Iraq, Afghanistan, and Lebanon. He is perhaps responsible for the deaths of hundreds of Americans and dozens of British troops. As the Islamic Revolutionary Guard Corps consolidates power inside Iran, Suleimani maintains an increasing chance to become president himself, as Iran’s hardline president Mahmoud Ahmadinejad finishes his second and last term.

That radical Iranian forces would attack the British embassy should surprise no one. Iranian authorities have never apologized for the seizure of the American embassy 33 years ago. While American diplomats and United Nations officials toast Iran’s former reformist president Muhammad Khatami and his call for a “dialogue of civilizations,” prior to becoming president, Khatami penned a piece praising those who took American diplomats hostage. Not only did Khatami, who ironically was honored at St. Andrews University in Scotland just five years ago, never retract his endorsement of hostage-taking, but he appointed Masoumeh Ebtekar, the spokeswoman of the U.S. embassy captors, to be his vice president.

Perhaps it is time to demand formal Iranian penance for the embassy seizure as a precondition to any diplomacy. Unfortunately, Western diplomats have conditioned Iran to expect rewards for its defiance.

Former President Jimmy Carter and his coterie of aides may consider the Algiers Accords ending the hostage crisis to be a triumph of diplomacy, but they were in effect simply a ransom which rewarded cash-starved Iran for its hostage-taking.

Ditto the Reagan administration’s poorly-conceived arms-for-hostages scheme. While some Reagan administration officials might argue that Iran did release hostages in exchange for weaponry and spare parts, no sooner had American officials offloaded the last shipment of military equipment, then kidnappers seized three more Americans.

While the seizure of the British embassy is inexcusable, it was the British Foreign Office’s refusal to recognize Iranian insincerity that put its staff in danger.

The British government initially suspended diplomatic relations with Iran after Ayatollah Khomeini ordered British author Salman Rushdie’s murder for allegedly committing blasphemy in his novel "The Satanic Verses." The Foreign Office said it would not restore relations with the Islamic Republic until Tehran promised to do nothing to harm Rushdie.

It took almost nine years, but eventually the Iranian government agreed. The day after the British ambassador returned, however, the Iranian leadership retracted its promise but the British, perhaps believing that the act of talking was more important than its result, decided to turn the other cheek.

Germany, too, has faced threats to its embassy in Tehran. In 1992, soon after Germany embarked on an initiative to ply the Islamic Republic with diplomacy and trade, an Iranian death squad targeted Iranian dissidents meeting at a Berlin café, killing four Kurdish dissidents. Five years later, after hearing from 176 witnesses and reviewed intelligence documents, a German court found an Iranian intelligence agents and Hezbollah operative guilty, and further found that the order to commit the terror attack had originated at the very top of the Iranian government.

For the Iranian regime, the fact that a German court had dared pass judgment on Iran was unacceptable. The day after the verdict, approximately 1,000 hardline vigilantes gathered in front of the German embassy in Tehran. Hossein Allah-Karam, the head of the group, warned, “One of our followers will strap a bomb to himself and blow up the embassy if Germany continues its accusations and hostile attitude against our leaders.”

Three days later, a group of 250 students clashed with police in front of the embassy. The students issued a statement warning, “If ever the Supreme Leader orders us, we will wage a holy war against the infidels.” Referring to the seizure of the U.S. embassy, they continued, “We are conquerors of spy nests.” Iranian authorities promised to protect the embassy. Klaus Kinkel, the German Foreign Minister, noted wryly, “Since suicide commandos only seem to act on orders from the government … we will take the Iranian government at its word.”

Alas, the Germans also learned the wrong lesson. Over subsequent years, they redoubled their efforts to bring Iran in from the cold. Between 2000 and 2005, European Union trade with Iran almost tripled. International Atomic Energy Agency documents show that it was during this period that Iranian authorities pursued not only covert uranium enrichment capability, but also efforts to design nuclear warheads.

One of the ironies of Khatami’s “Dialogue of Civilizations” is that it was during his tenure that Iran reaped a hard currency windfall from European trade and the rise of oil prices but, instead of investing in civilian infrastructure, applied the greatest proportion of that money to its nuclear and missile programs.

Still, there might be a silver lining from Iran’s latest outrage at the British embassy. While Iranian leaders rhetorically belittle sanctions, the Iranian reaction to them indicates that the Iranian leadership is far more sensitive to international sanctions than they will ever admit.

Tehran scarcely reacted when the United Nations Security Council designated specific companies and individuals involved in proliferation or Iran’s nuclear program, but as soon as London went after Iran’s Central Bank, Iranian officials reacted. They recognize their vulnerability.

Should the West sanction Iran’s Central Bank effectively, neither Russia nor China can continue to do business with Iran. Security Council buy-in would be irrelevant.

The attack on the British compound suggests that the Iranian government fears economic isolation much more than diplomatic isolation. Perhaps it is time to enforce both.

Michael Rubin is a resident scholar at the American Enterprise Institute. He earned his Ph.D. in Iranian History at Yale University while doing research in Teheran. Follow him on Twitter@mrubin1971.