World leaders seek new Iran strategy

By Timothy Heritage - Analysis

BRUSSELS (Reuters) - World leaders face pressure to find a new policy for dealing with Iran following its disputed presidential election and crackdown on protesters, but are unlikely to tighten sanctions any time soon.

The United States and the European Union want to encourage democratic change but will also try to avoid doing anything that could block the way to dialogue with Tehran when the crisis ends or be portrayed by Iranian leaders as interference, experts say.

They are likely to hold back the threat of tighter sanctions for use in discussions on Iran's nuclear program. Agreement on trade sanctions would be unlikely anyway because of opposition from U.N. Security Council members China and Russia.

But they may also avoid embarking on any new strategy for now while the situation in Tehran remains fluid.

"The dynamics of the ruling establishment have changed, the dynamics of the opposition have changed. We are dealing with a totally new scenario," said Mehrdad Khonsari, an analyst at the Center of Arab and Iranian Studies in London.

World leaders may have been caught off guard because they expected former prime minister Mirhossein Mousavi to win the June 12 election.

In the event, he was declared a distant second behind President Mahmoud Ahmadinejad, prompting street protests and a crackdown by the Iranian authorities in which about 20 people have been reported killed and hundreds have been arrested, and exposing deep rifts in the ruling elite.

"What we are seeing has completely changed the dynamics in which we were hoping to engage in dialogue with Iran," said Clara O'Donnell of the Center for European Reform in London.

"For the moment, we are still seeing what we have seen before -- leaders holding back, trying to see what is happening, trying to make sure they are not seen as meddling in the system and not making matters worse for the protesters."

CONCERNS OVER NEW SANCTIONS

The 27-nation EU has been fiercely critical of Iran in the crisis, and often more outspoken than Washington, which has been trying to engage with Iran under President Barack Obama.

But, like the United States, the EU has avoided talk of new punitive measures.

"My worry is that talk of sanctions, talk of a tougher line, might just be the start of an excuse for the Iranian leadership not to listen in to what is now being said by the Iranian people," Swedish Prime Minister Fredrik Reinfeldt, about to take the EU presidency for six months, told Reuters in an interview.

The United States and the EU have scant leverage on Iran, which limits their options to condemnations of the repression and calls for the people's democratic will to be respected.

In addition, they fear that Russia and China are seeking to use their good relations with the authorities in Tehran as a pawn in a geopolitical game with the West.