Analysis: Hopes for Better Iran Ties Lag

Additionally, the U.N. nuclear watchdog agency may conclude within a few weeks that Iran is doing its part to help an international investigation into the origins of its once-secret nuclear program. Such a finding would undercut the U.S. claim that Iran has something to hide.

Apparently concerned the report will favor Iran, the U.S. is demanding that Iran admit that it tried to make atomic weapons in the past. Iran denies ever working on a nuclear weapons program and says it wants to develop civilian nuclear energy, which would free up more of its energy resources for export.

The recently announced retirement of the chief U.S. negotiator on Iran, Undersecretary of State Nicholas Burns, was seen inside the administration and out as a clear sign the talk-or-penalties venture had run its course.

At least in public, Rice and other administration officials do not dismiss the possibility of talks with Iran before Bush leaves office next January. There is little incentive for either Iran or the administration to make hard choices now, however, and both sides recently have hardened their rhetoric.

"As to whether or not we can improve the state of U.S.-Iranian relations, that's something that I would put to Iran," Rice said last month. "As I've said several times, the question isn't why won't we talk to Tehran. The question is does Tehran want to talk to the United States?"

The U.S. claims that even mild international penalties give backbone to a separate U.S. effort to crimp Iran's vast overseas financial operations. Solo U.S. financial penalties have had a ripple effect, seen as international banks have scaled back financial dealings with Iran. The effort has not persuaded Iran to back down an inch on its nuclear program.

The U.S. has little independent diplomatic or economic leverage over Iran, and needs other nations to give meaning to any threat of economic loss.

Iran and the U.S. have had no diplomatic relations since shortly after the 1979 storming of the U.S. Embassy in Tehran when American diplomats were held hostage. Since then, the U.S. has cut nearly all economic ties.

Rice got Bush's blessing to make a major shift in U.S. policy less than three months into her term as top diplomat in 2005, when the U.S. agreed to support stalled European nonproliferation talks with Tehran.

U.S. officials had dismissed the European talks as fruitless or counterproductive. Rice argued that Iran was exploiting the breach between the U.S. and Europe.

When the European negotiations remained stalled the next year, Rice sweetened the pot by offering to show up for talks herself if Iran first agreed to halt nuclear development the West feared would yield a bomb. Although Iran had previously agreed to that condition, it has now dug in and refused to halt the work under any circumstances.

The offer was never fully supported across the Bush administration. Some of Bush's most conservative advisers disliked the offer, but backed it on assumption it would fail. The few voices arguing for the bolder move _ talks without conditions _ did not get much of a hearing.