If you want people to be your allies and do whatever it is you want them to do, you need to give them an incentive to do it. Removing sanctions is exactly that kind of incentive. Even if Iran's ultimate aims are malevolent at the moment, can you imagine after 15 years without sanctions and with rising growth and prosperity, that they'd chuck all of that away to go to a war against nuclear superpowers that they would surely lose? More likely that the people of Iran would say 'more of the same please' and eventually become a worthy asset in the region.
Threatening and sanctioning a country again and again and again and so on ad infinitum is no way of running a foreign policy.
That said, Bush is entitled to his opinion. These aren't exactly easy, predictable issues and I'll certainly refrain from calling him a moron or whatnot.
