New York (CNN) -- A new report saying that Iran could be secretly working on a nuclear weapon is a major development, but not one that should lead the U.S. to consider a military strike against the Tehran regime, according to analyst Fareed Zakaria.





The draft report, obtained by CNN and not yet approved by the International Atomic Energy Agency's board of governors, is the U.N. nuclear watchdog agency's strongest warning yet that Iran could be aiming to build a nuclear bomb.





Zakaria told CNN the report should spur U.S. diplomacy to prevent Iran from developing nuclear weapons but that talk by commentators outside the U.S. government of a potential military strike against Iran was wrongheaded. "To be casually talking about military action because we're getting frustrated seems to me somewhat dangerous," he said.





Iran's Green Movement of protesters against the regime indicates that waiting could have its benefits, Zakaria said. "At the end of the day, time is not on the side of this regime. It's a dysfunctional regime that has run the economy into the ground, taken a great and open and proud nation and turned it into a kind of paranoid and closed one and which is clearly losing the support of young Iranians by the day."





Zakaria, author and host of CNN's "Fareed Zakaria GPS," spoke to CNN on Thursday.





CNN: The International Atomic Energy Agency has done a report saying that Iran could be at work on building a nuclear weapon. What do you think that means?





Fareed Zakaria: That's a major development because so far we have not really been able to assess whether Iran has decided definitively that it wants nuclear weapons. We know that it wants a nuclear capacity -- that is clear -- and it wants a large nuclear capacity and one that is robust so that they have multiple production sites.





But it has always seemed as though there were two views within the Iranian leadership. One was that Iran should develop a robust civilian nuclear capability and a robust missile program but that it should not put the two together because that would place it in clear violation of the Nuclear Non-Proliferation Treaty. There are clearly others in Iran who believe that Iran should simply have nuclear weapons. ...





This would suggest that the harder line faction within Iran is winning out. We don't know for sure because this is all guesswork frankly. ...





CNN: What's happening with the negotiations?





Zakaria: The Iranians have been playing a very peculiar negotiating game where they sometimes seem interested in negotiating but rarely do they actually engage in good faith. ... They rarely seem to engage in these with a consistent pattern with consistent positions -- which either means the leadership is very divided or they're playing games.





CNN: What's your view about the wisdom of imposing new sanctions?





Zakaria: It probably is the only course available right now since the prospect of engaging with Iran and giving it positive inducements does not seem to be going anywhere. I also think the sanctions that are being talked about are fairly narrow and targeted at particularly the Republican Guard within the regime, which seems to be most powerful faction. And that's the right approach to take. We know that generalized sanctions only hurt the average Iranian, and that is entirely counterproductive.





CNN: What's the impact of the domestic turbulence inside Iran, including the protest movement?





Zakaria: Nobody knows for sure, but it does seem to have confused the situation internally. [Iranian President Mahmoud] Ahmadinejad had made some conciliatory statements on the nuclear issue, which were then attacked by the opposition, and he retracted it, which suggests that he's feeling the pressure. It suggests that there are divisions within the regime, there's some sense of vulnerability. ... It just makes it more difficult to negotiate with them, but it also suggests it may not be the worst thing in the world to wait and watch how this plays out in Iran.





CNN: What do you think about the military option?





Zakaria: The problems with the military option remain what they've always been, and it's a little alarming to
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