By Tabassum Zakaria and Caren Bohan
WASHINGTON (Reuters) - President Barack Obama entered the White House in 2009 carrying an olive branch for Iran, determined to show the world that Washington would not play the villain in a relationship marked by blood and bitterness over three decades.
Obama chose his words with excruciating care in reaching out to Iran publicly and privately, including through secret letters to Iran's Supreme Leader. The new president emphasized he wanted a "new beginning" with a country that called the United States "the Great Satan" and was branded by his predecessor as part of an "axis of evil."
Obama intended to go the extra mile on engagement, his aides said, so if the gambit failed, allies and adversaries alike could not point the finger at the United States as the "bad guy." Instead, they would rally behind the effort to pressure Iran.
Three years later, tensions over Iran's nuclear program have escalated to their highest level in years. Tehran is threatening to block the Strait of Hormuz and the chances of a miscalculation that could lead to a military clash - and a global oil crisis - appear to be rising.
Diplomacy has given way to harsher tactics, with Obama and his European allies trying to isolate the Islamic republic with the toughest sanctions ever.
Interviews with U.S. officials reveal a strategy of watching and waiting and a belief that the West's leverage over Iran may grow as Tehran feels the heat from the sanctions and popular upheaval in the Middle East.
One official also predicted that the neighboring government of Syrian President Bashar al-Assad, a key Iranian ally, would ultimately collapse, adding to the worries of Iran's leaders.
"It's our assessment that the Assad regime is not going to survive," White House deputy national security adviser Ben Rhodes told Reuters.
"The fall of the Assad regime would substantially impact Iran's strategic position in the world and the region. The combination of those sanctions and the demise of the Assad regime is a level of pressure that the Iranian government has never been under before," he said.
The White House insists that the United States is not pursuing a strategy of seeking "regime change."
"We are absolutely not," Rhodes said. "It's very much the policy of the United States to change Iran's behavior through our sanctions and through isolation, not to change the Iranian regime."
Obama remains open to talks with Iran, aides say. But after years of disappointment, with a U.S. election looming, and with Congress and allies like Israel lobbying him to stand tough, Washington sees the next move as Tehran's, officials and European diplomats say.
How Obama arrived at this point is a story of peace offers made and rebuffed, a crushed revolution on Tehran's streets, and dashed hopes for a civilian nuclear deal.
At the start of the 2012 U.S. election year, Iran and its suspected quest for a nuclear bomb is firmly at the top of Obama's foreign policy priorities.
Obama began with outreach - some of it unusually direct.
Early in his term, the president sent a personal letter to Iranian Supreme Leader Ali Khameini, who holds ultimate power, to show the seriousness of the outstretched hand. "A letter from the president was the clearest signal of our intentions that we could possibly make," a U.S. official said.
The United States and Iran do not have formal diplomatic ties.
Obama was closely involved in writing the letter that took account of their differences on nuclear and other issues, made clear there were two paths, and expressed a desire for a different kind of relationship, officials said. It was also a test to see if a serious dialogue could begin.
And in an unprecedented March 2009 Persian New Year message to the people and leaders of Iran, Obama repeatedly referred to the "Islamic Republic of Iran." It was a recognition of the formal name of the government and a signal that "regime change" was not the U.S. policy.
The intention was to show "a U.S. president who is not playing the villain in Iranian politics," Rhodes said.
"When you have a U.S. president who is not playing that role and saying look we've had a difficult history, let's look forward, the regime loses one of its most powerful propaganda tools," he said.
But Khamanei's response to Obama's 2009 letter contained nothing encouraging that the administration could act on. A second letter was sent to Khameini tied to that response.
Late in 2009, Obama's policy began to shift.
In September, he took to the world stage at a Group of 20 summit in Pittsburgh, flanked by the leaders of Britain and France, and revealed that Iran was building a secret nuclear fuel plant underground near the holy city of Qom. The previous evening, Obama made sure his aides had briefed Russian and Chinese officials, who had not known about the facility.
In October, in direct talks in Geneva, the United States and its allies offered nuclear fuel for a civilian nuclear reactor in Tehran. In exchange, Iran would ship its enriched uranium outside the country, where it would be rendered unusable for a potential nuclear weapon.
Iran never picked up on the offer. The final straw when Iran declared in February 2010 that it would begin enriching uranium up to 20 percent.
By the end of 2009, "we were fully shifted to the notion of pursuing a U.N. Security Council resolution" with more sanctions, one official said.
Obama's critics and political opponents assert that his initial outreach was dangerous and naive. Current and former Obama aides disagree sharply.
"There was never any illusion or naivete about who the regime was. There was never any assumption that we would pursue this regardless of their behavior," said Dennis Ross, a top White House adviser on Middle East policy until last month.
"If they weren't prepared to be responsive, then the assumption always was this will make it easier for us to mobilize real pressure against them," he said.
Obama was also criticized as missing a golden opportunity when the largest street protests in the Islamic republic's history broke out after Iran's disputed June 2009 election.
The protests, ultimately quashed with violence, did appear to catch the White House by surprise. But aides defended the muted U.S. response.
"We knew that too overt an embrace in some ways could hurt the Iranian opposition," said Jim Steinberg, former deputy secretary of state. "Especially when it looked like they had a chance of prevailing, we didn't want to undercut them and strengthen the hand of the hardliners."
A SOFT WAR?
U.S.-Iran tensions continued to ratchet up, and a string of events made it look to the outside world like an undeclared "soft war" was under way.
The United States accused Iran's shadowy Quds Force in a plot to assassinate the Saudi ambassador to Washington.
The Stuxnet computer virus attacked centrifuges at Iran's Natanz enrichment facility. Iran accused Israel and the United States.
Late last year, the United States lost a spy drone in Iran, unmasking an aggressive surveillance program.
There have been unexplained explosions at an Iranian missile depot and four nuclear scientists have been killed in Iran - the latest on Wednesday.
"We had absolutely nothing to do with the deaths of any of these scientists or the missile depot. Things exploding in Iran do not have anything to do with the United States," a U.S. official said.
Iran reacted to those events and the stepped-up economic sanctions as if under siege. It threatened to close the Strait of Hormuz, a major oil shipping lane.
"They feel themselves under threat internally. They talk about the soft overthrow and the covert war that is being waged," said John Limbert, a professor of Middle East studies at the U.S. Naval Academy.
U.S. officials downplayed the possibility that Iran would follow through on its threats.
Iran has threatened to close the Strait before, usually when its leaders feel international pressure, another U.S. official said on condition of anonymity.
"It's doubtful Iranian leaders want an all-out war, but they'll continue to agitate and push the envelope in ways they believe advance their national interests," the official added.
WAITING FOR IRAN
Obama is still open to an Iranian overture for serious negotiations on its nuclear program, officials say. Indeed, that is the ultimate goal of the pressure strategy, they say.
"We have a number of ways to communicate our views to the Iranian government, and we have used those mechanisms regularly on a range of issues over the years," White House National Security Council spokesman Tommy Vietor said.
"But any message that we have delivered to the Iranian government would be the same as what we've said publicly," Vietor said.
For now, Obama is focused on new sanctions that target Iran's central bank and oil sales.
"We are already seeing ... a really substantial impact on the Iranian economy, the Iranian currency," Rhodes said. "The next step for us is making sure that as we do that there is continued space for the Iranian government to take a different path, rather than simply seeing our pressure as an end of itself."
But with Iran announcing it has begun enrichment at the protected underground site near Qom, and Israel not ruling out a unilateral strike on Iran's nuclear sites, time may be short.
U.S. intelligence agencies say there is no evidence that Iran has decided to move forward with building a nuclear weapon. But experts point out it is taking steps to lay the groundwork so it can move quickly if that decision is made.
If Iran decided to move forward, it would be about a year away from having a crude nuclear explosive device, David Albright, president of the Institute for Science and International Security, said. "They still don't know quite how to move forward without getting caught," he said.
(Additional reporting by Arshad Mohammed and Warren Strobel; Editing by Doina Chiacu)