By Parisa Hafezi and Mehrdad Balali
ANKARA/DUBAI (Reuters) - Iran may be ready to reach a nuclear deal with world powers to revive its economy, but is in no rush to go further by restoring relations with the United States, calculating this would imperil its domestic support.
According to one official, hardline loyalists of Supreme Leader Ayatollah Ali Khamenei have reached a compromise with supporters of the pragmatic president: Tehran should try to win relief from international sanctions by resolving the nuclear dispute, but not normalize ties with "the Great Satan".
However, some allies of President Hassan Rouhani may not have given up on re-establishing relations with Washington, which were severed after the 1979 Islamic Revolution.
Hostility to the United States has always been a rallying point for the clerical establishment, despite the decades of political isolation and sanctions-related economic hardship that estrangement has cost. Take this bogeyman away, and the ideological glue that holds together the faction-ridden leadership would weaken, analysts say.
"Hardliners understand that a nuclear deal will benefit the establishment, but they see normalization of ties with America as a threat to their authority," said a pro-reform former senior official.
Iran and six powers - the United States, Russia, France, Germany, China and Britain - are in talks on curbing Iran's atomic activity in exchange for a gradual lifting of sanctions. They face a self-imposed Nov. 24 deadline to conclude a comprehensive deal, after missing an original July target.
The United States and some of its allies suspect Iran is using its nuclear program as a cover to develop atomic bombs. Iran denies this, saying it is solely for civilian purposes.
Iran's policy-making establishment, composed of hardline Islamists, pragmatists and reformers, agrees at least on one issue - that a comprehensive nuclear deal will help Iran to grow richer and politically stronger through the easing and eventual lifting of the sanctions.
Khamenei's hardline allies are willing to tolerate top Iranian diplomats sitting down with U.S. counterparts to discuss the nuclear issue. However, they fear a deal might pave the way for full relations with the United States, eventually weakening their influence, the authority of Khamenei and, by extension, the legitimacy of the Islamic Revolution.
While Rouhani's camp believes it is vital to end the hostility with Washington to improve the economy, analysts and officials say, Khamenei's conservative supporters want only a limited thaw between the arch-enemies. Normalization of ties with Washington would mean crossing a red line for them.
Washington and Tehran cut diplomatic relations after students seized the U.S. embassy in Tehran 35 years ago this week, holding 52 Americans hostage for 444 days.
"The event this year is imbued with a spirit of antagonism toward arrogant powers. It calls for even louder slogans against America," hardline cleric Alireza Panahian told a crowd gathered outside the former U.S. embassy compound in Tehran, called the "Den of Spies" in Iran since the seizure.
"We will never come to terms with savage Americans, even if we have chosen to negotiate. Those cannibals, the Americans, shouldn't jump to any conclusion with these talks," he said to chants of "Death to America" and "Death to Israel", state television reported.
Since Rouhani's election in 2013, there has been a tug-of-war between the hardline and pragmatic camps about foreign policy and particularly on how to deal with the United States.
"They have reached a compromise: resolving the nuclear dispute but no normalization of ties with the Great Satan," said a senior Iranian official, who asked not to be named.
The state of the economy - weakened by U.S. and European Union restrictions on Iran's oil exports and international financing as well as rising prices, high unemployment and investors keeping a tight hold on their purses - have persuaded Khamenei to back the nuclear talks.
Khamenei has shot down Rouhani's hardline critics by repeatedly urging unity and faith in the government, and calling the nuclear negotiators "the children of the Revolution". Rouhani will enjoy Khamenei's blessing as long as his power does not surpass the leader's authority, analysts say.
"Some Rouhani allies desire resumption of ties with the United States. This is where the problem arises," said a pro-reform former senior official.
Under the Iran's system of rule by a religious legal scholar, Khamenei controls the judiciary, security forces, the Guardian Council that vets laws and election candidates, public broadcasting and foundations that own much of the economy.
Khamenei has always tried to ensure no group, even among his conservative allies, gains enough power to challenge his authority. He blocked attempts by previous presidents to boost their authority, such as when reformist Mohammad Khatami tried to create a freer society and hardliner Mahmoud Ahmadinejad tried to implement populist policies.
Hardliners fear that by normalizing ties with the United States, the establishment will lose the backing of its core supporters that will lead to a weakening of their position domestically and globally, analysts say.
Khamenei has said the establishment's hostility towards the United States will remain, despite a willingness among some Iranian officials for wider engagement with Washington.
"Improving the economy is important but not at the price of sacrificing the pillars of the revolution," said the senior Iranian official.
Tehran and Washington have common interests and threats across the Middle East. They have cooperated tactically in the past and relations have improved modestly since the election of Rouhani, who promised "constructive engagement" with the world.
Alarmed by the rise of Sunni militants in Syria and Iraq, the upheaval of the Arab Spring and the civil war in Syria, Iranian leaders have started to weigh the costs and benefits of continuing their hostility towards the United States.
"Also, considering the prospect of a nuclear deal and its impact on Iran's economy have further encouraged the establishment to soften its tone," said the former official.
But Iran still backs Syrian President Bashar al-Assad, its sole regional ally. Western adversaries say Tehran is supporting Assad with arms, cash and Revolutionary Guardsmen to train militia to help win the war. Iran denies providing military and financial support to Syria.
Many at the grassroots level across Iranian society want a "good" relationship with the United States, desiring a freer society and improved economic conditions. Western business delegations have already started to visit Iran, paving the ground for the day sanctions are eased.
"These days I feel proud of being an Iranian again. The Western countries are racing with each other to invest in Iran," said private-sector employee Mohammad Reza Asgari in the southern port city of Bandar Abbas.
But perhaps not surprisingly, given the decades of hostility, some Iranians remain suspicious of Westerners. "They are not our real friends. They see Iran as a great opportunity to earn money, like hungry wolves,” said Zahra Safari, 19-year-old philosophy student in Tehran.
(Writing by Parisa Hafezi, Editing by William Maclean and David Stamp)