World powers were hoping in crunch talks in Baghdad on Wednesday to persuade Iran to suspend sensitive nuclear work in order to ease fears that Tehran wants the bomb and abate Middle East tensions.
Iran however was expected to press the P5+1 -- the United States, Russia, China, Britain, France and Germany -- to ease sanctions and accept its right to a peaceful nuclear programme. It denies wanting atomic weapons.
Iran's lead negotiator Saeed Jalili was quoted by Iranian media as saying he hoped the talks would be the start of a "new era" in relations.
"We sense that the West has realised that the time for using its pressure strategy is over," Jalili was quoted as saying by the Fars and Mehr news agencies.
The West fears that a nuclear-armed Iran would destabilise the already volatile Middle East and sound the death knell for 60 years of international efforts to prevent the spread of atomic weapons, sparking a regional arms race.
Israel, Washington's closest ally in the region, feels its very existence would be under threat and has refused to rule out a pre-emptive strike on Iran's nuclear facilities.
US President Barack Obama took office in January 2009 offering a radical change in approach to his predecessor, George W. Bush, in dealings with Iran, famously offering an "extended hand" to Tehran if it "unclenched its fist."
This failed, however, and Iran has since dramatically expanded its programme, enriching uranium to purities of 20 percent, a level within spitting distance, technically speaking, of the 90 percent needed for a nuclear weapon.
As a result, talk of war has increased and the UN Security Council has imposed more sanctions on Iran. Additional US and EU restrictions targeting Iran's oil sector are due to come into force from July 1.
But now, both sides "have walked up to the abyss and they have both decided they don't want to go down it," said Trita Parsi, author of an acclaimed book about Obama's dealings with Iran called "A Single Roll of the Dice."
Obama, seeking re-election in November against a Republican challenger accusing him of dawdling over Iran and keen to see oil prices come down, is impatient for results, while Iran is feeling the pinch from the sanctions.
Oil prices edged lower in Asian trade on Wednesday amid hopes that the Baghdad talks would ease tensions.
The P5+1 and Iran met in Istanbul in mid-April and managed to find enough common ground to come to Baghdad, with both sides hailing what they said was a fresh approach from the other.
But the Baghdad meeting will put these renewed efforts to the test as they seek to set the parameters of what will be a lengthy and arduous process of compromise requiring hitherto unseen amounts of patience and trust.
One key way for Iran to win the confidence of the P5+1 would be a suspension of 20-percent enrichment, while another would be Iran shipping its stockpiles of enriched uranium abroad.
What might also help is Iran implementing the additional protocol (AP) of the nuclear Non-proliferation Treaty, which allows for more intrusive inspections by the International Atomic Energy Agency.
The IAEA also wants Iran to address allegations made in its November report that until 2003, and possibly since, Tehran had a "structured programme" of "activities relevant to the development of a nuclear explosive device."
IAEA chief Yukiya Amano said on Tuesday after talks in Tehran that a deal on ways to go over these accusations with the Iranians would be signed "quite soon."
The reaction of Western countries -- and Israel -- was cool, however, with White House spokesman Jay Carney saying Washington "will make judgments about Iran's behaviour based on actions."
But Iran will likely be disappointed in Baghdad if it expects sanctions relief in return for any of these moves, with the most it can hope for being a pledge -- with strings attached -- not to impose any more, diplomats said.
Reports said that in talks in Amman on Tuesday, the P5+1 worked out a detailed proposal to put on the table that would include Iran shipping out uranium in return for fuel for a reactor making medical isotopes.
The Financial Times reported that Western powers were prepared to offer Iran an "oil carrot" that would allow it to continue supplying crude to Asian customers in exchange for certain guarantees.
It is however far from certain that any firm promises will be made by either side in Baghdad, with one envoy playing down expectations by saying that even if the talks go well, the results might not be "tangible."