The US also hopes to establish a diplomatic presence in Tehran for the first time in 30 years, according to the Guardian newspaper.
Evidence mounts that international sanctions are having an impact.
Iran tested the Shahab-3 missile, which could hit Israel or US Mideast bases.
Secretary Rice has floated the idea of an interests-section office – a step down from an embassy.
Readers write about religion in politics and the war in Iraq.
Military analysts say the Islamic Republic would strike back in unconventional ways – targeting American interests in Iraq and Afghanistan.