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U.S. and European diplomats believe that hard-line elements inside Iran's political establishment used the Saberi case in a bid to sabotage any rapprochement with Washington.

The target also comes about ten weeks after the Iranian presidential election June 12, giving the U.S. some time to gauge the new Tehran administration. Current Iranian President Mahmoud Ahmadinejad, who is running for re-election, has at times publicly welcomed Mr. Obama's call for negotiations on the nuclear question. But Tehran continues to expand the number of centrifuges enriching uranium at its Natanz facility.

The U.S. Congress is debating legislation that would require the White House to sanction companies exporting refined petroleum products to Iran. Tehran imports roughly 40% of its gasoline despite having some of the largest energy supplies in the world.

All Iran's presidential candidates have said they will not abandon enriching uranium, but Tehran political insiders with knowledge of the talks say Iran could agree to a short-term "freeze for freeze" formula. Iran would then offer that Western powers can freely monitor Iran's program to ensure it is not turning military -- in return for sharing technology and expertise.

"The Americans will have to accept this offer, they have no choice," said Sadegh Kharazi, a former deputy foreign minister who remains involved in Iran's foreign policy. "Iran will not back down. From now on, let's all talk about how to form partnerships so it benefits both parties."

The benchmarks the U.S. and its allies are establishing also include signs Tehran will be willing to rein in its support for militant groups in the region.

Israel and key Arab allies have voiced concerns about the usefulness of diplomacy with Iran. The U.S. point man on Iran policy, Dennis Ross, was greeted with skepticism from Arab allies during a tour this month through Egypt and the Persian Gulf countries, said U.S. officials. Saudi Arabia and the United Arab Emirates., in particular, have expressed alarm over Iran's nuclear activities and its moves to support militant groups operating in Lebanon, Iraq and the Palestinian territories.

Israel believes Tehran could be far enough advanced in its nuclear work by early next year to make protracted negotiations moot. Last week, Brig Gen. Michael Herzog, chief of staff to Israel's defense minister, publicly called at a conference in Washington for the Obama administration to set clear timetables and benchmarks for its Iran diplomacy. He reiterated statements by new Israeli Prime Minister Benjamin Netanyahu's government that Jerusalem might take military action against Iran to end its nuclear threat. "When we say a nuclear Iran is unacceptable, we mean it," Mr. Herzog said. "When we say all options are on the table, we mean it."