(NSI News Source Info) TORONTO, Canada / TEHRAN, Iran - November 22, 2011: Grudgingly admired in the past by the West for its negotiating skills and by the Iranian nation for its uncompromising stance, Iran's leadership may have misjudged recent confrontational tactics in its nuclear standoff with big powers, analysts say.
Miscalculating both its own bargaining strength and world resolve on the nuclear dispute has weakened Iran's familiar blend of brinkmanship and conciliation, analysts say.
Iran dismissed on Tuesday fresh sanctions imposed by the United States, Britain and Canada, saying such steps would only intensify Iranian popular support for the nuclear program, which Washington and its allies say is a cover to build bombs.
The new sanctions target Iran's energy and financial sectors and France has proposed "unprecedented" new punitive action, including freezing the assets of the Iranian central bank and suspending purchases of Iran's oil.
The news pushed benchmark Brent crude above $107, reflecting concerns about escalating tensions with the world's fifth biggest crude exporter.
It is unclear how Iran's hardline conservative leadership will act, with hard calculation, national pride and Islamic outlook all part of the equation. But senior officials have repeatedly hinted that diplomacy would be the first recourse.
With international tension over Iran's disputed nuclear ambitions mounting, the clerical establishment is now ultimately cautious and tends to prefer a controlled crisis as opposed to full-blown confrontation, analysts and diplomats said.
"The regime is very worried about a military strike. They have mishandled the issue and it is now very difficult for them to reach any kind of compromise," said a senior European diplomat in Tehran, who asked not to be named.
"Also they are worried about a spread of the Arab Spring (popular protests) into Iran and cannot risk more economic pressure that can cause street protests."
Analysts say ordinary Iranians are becoming less admiring and more wary of the Islamic elite's uncompromising nuclear stance that has provoked international sanctions, given a perceived lack of transparency in the program that has raised fears abroad of a covert push to develop atomic bombs.
The sanctions are meant to coerce Iran into suspending sensitive nuclear work and negotiate seriously on a peaceful solution. The United States and Israel have not ruled out military strikes on Iranian nuclear sites if diplomacy and sanctions are ultimately judged to be futile.
MORE HARM THAN GOOD
Explicit threats issued by Iran in the past few weeks to inflict "harm and pain" on Israel, the United States and its allies and possibly to curb oil exports through the Strait of Hormuz, "could do more harm than good," analysts said.
"By saying these things they boost the hardline stance of radicals in the West and in Israel," said analyst Saeed Leylaz.
However, a lack of stability in the Middle East, combined with Iran's ability to stir up trouble in Lebanon, Syria, Iraq and Afghanistan, do weigh on Western policymakers' minds when contemplating tougher action against Tehran, officials say.
"Their (Americans) hands are sufficiently tied down in the region ... The American nation cannot tolerate another overseas military flashpoint," said an Iranian official, speaking on condition of anonymity.
Iran can also draw comfort from the anti-sanctions posture of veto-wielding Security Council members Russia and China, but by pursuing its confrontational stance it may overplay its hand.
"We do not by any means trust either China or Russia ... They backed the four U.N. resolutions against Iran," said the Iranian official. "But we have to play this card as we have no choice to prevent a military action."
Tough talk from Tehran about hitting back over the latest U.N. nuclear watchdog report - which prompted the latest sanctions due to intelligence suggesting Iran had worked on an atomic bomb design - may remain just that with no tangible effect, analysts say.
"Reviewing cooperation with the IAEA (International Atomic Energy Agency), or evaluating ties with Britain, will remain just rhetoric ... Iran is already isolated ... such moves would mean suicide for Iran," said the senior diplomat.
Iranian lawmakers are considering a review of the country's cooperation level with the IAEA over its hard-hitting report, but the parliamentary debate could last for weeks.
"FEARING SANCTIONS"
Public opinion long backed the hardline leadership's tough nuclear line, spurred on by a compliant local media that focuses on the West's perceived unfair treatment of Iran's nuclear case. However, dissenting voices have emerged since sanctions have started to bite and speculation of military strikes has risen.
"I fear sanctions because it means more economic pressure on ordinary people ... How are we ever going to cope with higher inflation?" said teacher Safanaz Soheili, 35, a single mother of two.
The crisis over Iran's atomic agenda is deepening, but Iran insists its nuclear program is not endangering world peace, citing a right to develop civilian nuclear energy as a party to the nuclear Non-Proliferation Treaty (NPT).
President Mahmoud Ahmadinejad appears determined to pursue a radical agenda -- but analysts say decisions on major security and diplomatic issues, including nuclear, are only made by the country's most powerful figure, Supreme Leader Ayatollah Ali Khamenei, who also has shown no sign of changing policy.
"The political infighting is deepening among the hardline rulers ... but it does not mean the regime will change its nuclear path," said Iranian political analyst Hasan Feghhi.
"Sanctions work in favor of Ahmadinejad, who will put the blame on the sanctions for his failure in the economic arena."
In the past few months capital flight from Iran has mushroomed and business is in deep recession. Feuding among senior figures in the conservative elite has multiplied.
"It's chaotic. The budget deficit has ballooned and international pressure is building," said merchant Mohsen Sarafizadeh.
(Editing by Mark Heinrich)
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