Dreams of detente - or at least a thaw in relations - between the United States and Iran seem to be stalling as both sides face strong opposition at home to turning enemies into friends.
Cautious steps have been made: Iran's moderate President Mohamad Khatami in January praised the "great American people" and asked for dialogue, and in June President Clinton responded with a call for "genuine reconciliation."
But now such moves to end nearly two decades of hostility appear under threat, as some in the US Congress and Iranian hard-liners work separately to undermine reconciliation.
"Like two young lovers, there is a mutual fascination," says a Western diplomat. "It is like a game: They want to be together, but they don't want to be seen to be together."
Iran is emerging as a strategic regional power and an efficient channel for Caspian Sea oil. But from the American perspective Iran remains suspect for allegedly backing terrorism and for posing a military threat to Israel.
In the US, a narrow congressional majority last week demanded in a statement that Iran's main opposition group, the Mujahideen e-Khalq (MKO), be taken off the State Department's list of "terrorist" organizations. The MKO, whose name translates to "People's Holy Warriors," was recognized as a terrorist group for the first time last year.
"If they manage to take the MKO off the list, it will be a major blow to the process of detente," says the diplomat. "For the Iranians it is a major topic, [listing the MKO] was the most significant American action since President Khatami was elected."
Fundamentalists hold sway
In Iran, Islamic fundamentalists who control the instruments of power consider the US the "global arrogance" that imposes "Zionist plots." They are led by conservative Supreme Leader Sayed Ali Khamenei, whose role as spiritual guide includes making final foreign policy decisions.
The reform-minded Mr. Khatami has been engaged for months in a battle against hard-liners who despise his policies of promoting a civil society, freedom of speech, and the rule of law.
Though Khatami won 70 percent of the popular vote in elections last year, the outcome of this battle is far from certain. The possibility of renewed relations with the "Great Satan" is seen by hard-liners as an attempt to topple a pillar of the 1979 Islamic revolution.
An increasing number of American foreign policy heavyweights - including former Secretary of State James Baker III, earlier this month - have called for a dialogue with Iran. But MKO lobbyists have been effective in Washington.
A statement signed by 220 members of the 435-seat House of Representatives Sept. 16 demanded a review of the MKO's terrorist status, and called Clinton's detente moves "wrong-headed." The MKO, it said, was the "legitimate opposition to the Iranian regime."
Iran Radio declared that the statement "is part of the congressmen's drive to raise campaign funds in order to win in forthcoming elections, and America's Zionist circles are generous in funding candidates...."
Israeli Prime Minister Benjamin Netanyahu has repeatedly called Iran the main threat to Mideast peace, and in July Iran tested the medium-range Shihab-3 missile. Iran rejects the US-sponsored Arab-Israeli peace process as unjust, and there are signs that lack of US pressure on Israel now to revive that process has scaled down expectations.
"People here have come to realize that Israel is too big an obstacle to aim for full diplomatic relations with the US," says another diplomat. "Khatami has really hardened his vocabulary against Israel - calling it a 'racist terrorist state' - and if Iran really wanted full ties, they wouldn't be doing that. Now they are aiming only for functional ties."
Where Iran tackles terrorism
Iran still ranks first in the State Department's lineup of state sponsors of terrorism for killing a handful of opponents abroad - a tactic also openly employed by Israel, analysts note - and supporting groups Washington deems to be terrorists.
Khatami told the UN General Assembly Sept. 21 - in the most unequivocal declaration of its kind to date - that Iran deplored terrorism in every form and would do everything to fight it.
Secretary of State Madeleine Albright is reported to be against taking the MKO off the terrorist list because it would send the "wrong message" at a delicate time.
And diplomats say the MKO terrorist listing is no surprise. The group claimed responsibility for a June bomb blast at an Islamic court in Tehran that killed three people. The MKO also said it assassinated the former prisons director and two others in a Tehran bazaar last month.
"They have carried out more terrorist attacks in the last 12 months than in the year before, when they were put on the list," says another Western diplomat. Because of his moderate policies, "Khatami is bad news for the MKO, and maybe they now feel the pressure to show that they are 'doing something.' "
The MKO has few supporters inside Iran, diplomats say, because they fought alongside Iraqi forces against Iran during the Iran-Iraq war of the 1980s. Controlled by Baghdad intelligence, MKO guerrillas carry out cross-border raids from Iraq. Iran counters with sporadic airstrikes.
According to the State Department, MKO violence began in the 1970s against the pro-West regime of Shah Muhammad Reza Pahlavi.
"Its history is studded with anti-Western activity," notes one State Department terrorism report. "Terrorist attacks" killed several US military personnel and civilians then, and the MKO supported the 1979 takeover of the US embassy in Tehran.
The MKO played a key role in the revolution, then broke with its leader, Ayatollah Khomeini. Some 200 prominent clerics of the new regime were assassinated in bomb attacks that the MKO said were the result of "people's justice."
Despite the scuffle over the MKO, the main planks of US policy remain unchanged: unilateral sanctions on Iran, laws to punish foreign investors, plans to bypass Iran with alternative oil and gas pipelines, and a "dual containment" strategy that also applies to Iraq.
US Congress-financed Radio Free Iran is due to begin beaming transmissions from the Czech Republic - a move Tehran dismisses as a cold-war tactic. House Speaker Newt Gingrich has since 1995 annually shepherded through about $20 million earmarked for "encouraging greater democracy" in Iran, a move seen in Iran as a bid to destabilize the government.
"If the Newt Gingrichs of this world dominate American foreign policy," says a senior Western diplomat, "it is difficult to imagine how there can be detente."