1) Never mind President Ahmadinejad; listen to Larijani
Despite his title, Iran's saber-rattling president does not hold executive power and has no direct authority to decide foreign policy or security matters, including the nuclear issue. Those issues are decided by Supreme Leader Ayatollah Ali Khamenei, in consultation with the National Security Council, chaired by Ali Larijani. The EU proposal will be relayed to Larijani, who will be the point man in negotiations with the West. Ahmadinejad's warning on Sunday that "we will record the talks and we will publish them at the appropriate time, so our people will be informed about the details" seemed a populist warning against compromise to those negotiating on Iran's behalf a sign of Iran's ongoing internal power struggle. But that doesn't mean Iran's position will necessarily be any more flexible; Larjani is a tough negotiator who, even without Ahmadinejad's pressure, will likely press for a deal that gives Iran more than the U.S. is inclined to concede.
2) Iran might agree to suspend uranium enrichment... but at a price
Iran's track record suggests it might agree to suspend uranium enrichment, but probably not as a precondition for talks which they would see giving up leverage with no quid pro quo but rather as an outcome of talks. Tehran did, in fact, suspend uranium enrichment, under monitoring by the IAEA, during the three years of nuclear negotiation with Britain, France and Germany. But those talks went nowhere, and Larijani is reported to believe that Iran surrendered too much leverage and weakened its position. Iranian leaders also believe the open-ended nature of those talks allowed the Europeans to play for time as long as Iran's enrichment program remained suspended. They are likely to see their decision to break off those talks and resume enrichment activities as having been vindicated by the new improved offer from the West.
3) There's room for compromise
Because Washington is demanding only a suspension of enrichment, not the dismantling of whatever enrichment capability Iran currently possesses, Iranian leaders have room to maneuver without appearing to back down. One option would be to simply claim "technical reasons" for turning off Iran's centrifuges until further notice. That would allow the IAEA to verify that no enrichment is currently taking place, creating a window of opportunity for talks. The Iranians would likely signal discreetly that its shutdown will last for a defined period. Conversely, in exchange for a suspension, Iran might demand some symbolic form of political recognition from the U.S.
4) But the Iranians feel they're in a position of strength
Iran's leaders believe the strategic balance has shifted in their favor since the previous talks with the Europeans. Rising world oil prices and the difficulties faced by the U.S. in Iraq have increased Tehran's leverage. Iran is also aware that the consensus reached in Vienna by European leaders and China remains fragile; while the Bush Administration insists that no military option is off the table, for example, Russia's foreign minister Sergei Lavrov said the agreement rules out the use of military force against Iran "in any circumstances." These factors could embolden Tehran's negotiating stance in the hope of extracting further concessions.
5) What a "grand bargain" with Iran might look like
If Iran and the U.S. could choreograph their way to the table, could they reach an agreement that satisfies both sides? The negotiations might take years, but such a deal remains possible. The Iranians have repeatedly stressed a willingness to find a solution that addresses the concerns of the international community while upholding its right to nuclear energy. Tehran is reportedly still ready to accept the principle that at least for defined period there would be no industrial-scale uranium enrichment on its own soil; the fuel for its nuclear reactors would be produced abroad and shipped back when spent. But Iran may hold out for a deal that allows it to maintain its 164-centrifuge enrichment cascade at Natanz for research purposes, under additional supervision if necessary. That cascade is too small to create bomb material, but the U.S. and its allies believe even research-scale enrichment would provide critical know-how and could also camouflage any covert bomb program. The issue of that research facility may be one in which each side tests the other's will over the negotiating table.
The reason the Europeans and others have been so insistent on the U.S. joining the talks is that security guarantees will be central to any eventual deal. European diplomats believe that as long as Iran fears attack by the U.S., hawks in Tehran will have an argument for pursuing a nuclear deterrent. But the U.S. won't offer Iran security guarantees without assurances from Iran on such issues as terrorism. So any negotiations over the nuclear issue would force Washington and Tehran to confront their differences over a number of other issues. The two nations are unlikely ever to kiss and make up, but such comprehensive talks could help manage the conflict between them in the interests of stability.