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US Officials Say Iran Feeling Pinch of Economic Sanctions

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Laurel Bowman

Obama administration officials told a Congressional panel Wednesday that economic sanctions against Iran are having an impact,  and the international community is cutting back on commercial ties with Iran.  Across town, another Obama official told a group of Iran experts that the U.S. still wants badly to engage with that nation.  Both events played out against a backdrop of leaked documents quoting Arab leaders as urging the U.S. to consider military action against Iran.

Iranian President Mahmoud Ahmadinejad says he's ready for talks next week with a European-led group that includes the U.S., China and Russia.

The parties meet Monday and Tuesday in Geneva, Switzerland, where they last met more than a year ago.  Iran's nuclear program is THE agenda, though Mr. Ahmadinejad has vowed not to budge on curbing his nation's nuclear program. Iran expert James Dobbins of the Rand Corporation says most Iranians back him.

"Polling indicates that the majority of them probably support nuclear weapons on the grounds that most of their neighbors have nuclear weapons," said Dobbins. "Pakistan has nuclear weapons, India has nuclear weapons//the United States has nuclear weapons and Russia does. So why would Iran, a major power in the region, be denied them?"

But even Iran's own neighbors are alarmed at its nuclear ambitions, as illustrated by published diplomatic cables of Arab leaders calling on the U.S. for military help in containing Iran.

Iran analyst Ellen Laipson:

"The fact of the leaks is not necessarily a bad thing," said Laipson. "It is part of the way Iran gets the message that within the region that they will look to the United States and outside to protect them.  Iran does not want us to have such a robust presence in the region."

Laipson calls for diplomacy over military action.

White House special adviser Dennis Ross agrees. He says President Obama has long sought direct talks with Iran.  
"If for 30 years you have someone else interpreting you to the Iranians and someone else interpreting the Iranians to you that is not going to be a prescription for trying to transform things so we wanted to use engagement to ensure that we could deal directly with the Iranians," said Ross.

Which takes us back to those talks in Switzerland. Again Ellen Laipson.

"The Iranians are perhaps hoping that if they appear to be very cooperative in the talks that the sanctions could be eased or lifted," she said.

Sanctions have hit Iran hard. Analysts say the country's economy is in tatters.

Stuart Levey is the Undersecretary of State for Financial Intelligence. He testified before Congress Wednesday.

"The cumulative effect of sanctions has been to increasingly isolate Iran from the international financial system," said Levey. "Iran is effectively unable to access financial services from reputable banks.  And it is finding it increasingly difficult to conduct major transactions in dollars or euros."

Experts say the sanctions have contributed to an aging energy infrastructure and a crippled financial sector.  Experts call it a middle economy whose stature cannot be ignored.

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