June 26 (Bloomberg) -- President Barack Obama should avoid a “tit-for-tat” with Mahmoud Ahmadinejad over Iran’s election dispute, and maintain focus on the longer-term U.S. interest in curbing the regime’s nuclear program, two former top Clinton administration officials said.

“We need to stand beside the opposition; we don’t need to get in the middle of this,” former national security adviser Sandy Berger said in a joint interview with former Secretary of State Madeleine Albright for Bloomberg Television’s “Political Capital With Al Hunt,” airing this weekend.

Albright said Obama, 47, has struck the right tone with statements strong enough to support Iranian protesters alleging the election was rigged without giving the regime evidence that the U.S. is interfering.

“Obviously his sentiments and those of the American people are with the demonstrators,” said Albright, who served with Berger under President Bill Clinton. “On the other hand, we do not want to be part of this story and give the Iranian leadership excuses.”

The prospect of the regime regaining control through a crackdown might leave Obama with little choice except to negotiate with Ahmadinejad. A protracted battle for power in Iran would create the risk of losing time as Iran enriches uranium, a process that can open the way to an atomic bomb.

Regime Shift

Berger, 63, said the Iranian regime is bound to emerge in a different position after the election turmoil.

“The veil of legitimacy has been stripped away from this government,” Berger said. A regime that “portrayed itself as a theocracy with democratic aspects is now a police state.”

On Capitol Hill, Republican Senator John McCain of Arizona and independent Senator Joseph Lieberman of Connecticut urged caution in any U.S. negotiations with Iran over its nuclear weapons to avoid lending legitimacy to a regime they said brutally repressed the protests.

Sitting down “across the table from an individual who is just responsible for the beating and killing of his citizens” is “certainly something I wouldn’t do,” said McCain, who criticized Obama when they faced off for the presidency for his willingness to meet with Iran’s leader.

Lieberman said the U.S. must be “really careful.”

Engagement “will convey legitimacy with Ahmadinejad and the supreme leader that they crave now but don’t deserve based on the results of the election,” Lieberman said.

Albright said the regime seems to be prevailing in the election dispute for the moment.

“They are being totally brutal,” Albright, 72, said. “On the other hand, I think the demonstrations will continue.”

Power Transfer

On North Korea, Albright and Berger said it is difficult to know for certain the dynamics of any potential transfer of power from dictator Kim Jong Il.

Circumstances suggest Kim, 68, is grooming his youngest son, Kim Jong Un, to take control, said a South Korean government official who briefed reporters this week on condition of anonymity. The official said there is no concrete evidence the son has support from the country’s elite, setting the stage for a possible power struggle.

North Korea conducted a nuclear-bomb test on May 25 and followed with launches of short-range missiles, prompting the U.S. to rally support for a United Nations Security Council resolution criticizing the moves and imposing further sanctions. The U.S. is tracking a North Korean ship on suspicion that it is carrying illicit weapons technology.

‘Unpredictability and Danger’

“It’s obviously, in the midst of this succession, a time of great unpredictability and danger with respect to the North Koreans,” Berger said.

On the Middle East, Albright said she was surprised at the cancellation of a meeting that had been set this week in Paris between Israeli Prime Minister Benjamin Netanyahu and U.S. special envoy George Mitchell.

An official traveling with Netanyahu and speaking on condition of anonymity said the prime minister wanted to do more work to prepare for the talks.

Obama and Secretary of State Hillary Clinton are pressing for a peace agreement that would establish a Palestinian state alongside Israel. They have said Israel must contribute by halting construction in settlements in the occupied West Bank.

Settlements Dispute

Netanyahu has agreed to maintain a hold on expansions yet says building must be allowed for “natural” growth to make room as children are born and families expand in existing settlements.

“The president and the secretary have taken a very appropriate approach,” Albright said. “We need to make sure that we’re able to follow out on the two-state solution.”

Albright recently hosted a dinner for Clinton with a group of predecessors. “There was no kind of bickering or second- guessing or anything like that,” Albright said. “We did talk about all the issues.”

Albright and Berger yesterday announced the merger of their international advisory practices, the Albright Group and Stonebridge International. The two will lead the combined firm, the Albright Stonebridge Group, along with former Senator Warren Rudman, a New Hampshire Republican. Their clients have included Atlanta-based Coca-Cola Co. and the advocacy group Human Rights First.

“We are creating a huge platform to be able to give advice internationally to our various clients,” Albright said. “And it’s great to be working with Sandy again.”

To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net.

Last Updated: June 26, 2009 00:01 EDT