Iran and the P5+1 traded proposals in Baghdad on Wednesday as a new round of talks over Tehran's controversial nuclear program got underway.
Iran is keen to ease sanctions on its vital oil ministry and central bank by Western nations, who have said they are unwilling to give up their key leverage point without a comprehensive agreement.
EU delegation spokesman Mike Mann explained some of the most painful sanctions -- including a European Union ban on Iranian oil imports beginning July 1 -- are a "matter of the law and they will come into force when they come into force."
The Baghdad talks could offer a test of how much the US and its allies are willing to bend on demands for Iran to halt all uranium enrichment, rather than just halting enrichment to 20%.
Ahead of talks the P5+1 - the five permanent members of the UN Security Council plus Germany - indicated they may be willing to limit their demands to Tehran halting enrichment to 20%, shipping all uranium enriched to 20% out of the country, and closing the highly fortified Fordow facility.
Full access for IAEA inspectors at all of Iran's nuclear sites in accordance with Tehran's obligations under the Nuclear Non-Proliferation Treaty are also among the West's key demands.
However, the specific conditions of the P5+1 proposal beyond halting enrichment to 20% remain unknown.
"The EU3+3 side put forward a detailed proposal which includes confidence-building measures that can pave the way for Iran to demonstrate that its nuclear program is for peaceful purposes," State Department spokeswoman Victoria Nuland told reporters in Washington.
"This approach would also include step-by-step reciprocal steps aimed at near-term action on our part if Iran takes its own steps," Nuland added.
Iran has indicated it has no interest in halting all uranium enrichment activities, which Israeli officials say is a key condition for averting a possible military strike on Tehran's nuclear facilities.
No breakthrough accords were expected in the Iraqi capital, suggesting all sides expect the negotiation process is likely to be long and complex.
Further reinforcing the belief that the talks may herald a protracted process, a Western diplomat in Baghdad told reporters the talks would focus on “confidence-building measures," especially gestures from Tehran.
While that allows the US and its Western allies to back down from threats of military action, it would likely bring objections from Israel whose officials charge Tehran is using the talks to buy more time for their bid for nuclear weapons.
Further, Israel maintains Iran must halt all enrichment activities, ship its stores of 20% uranium out of the country, and allow permanent human monitoring by the IAEA.
Enriched to 20 percent is considered a key jumping off point should Tehran decide to make a sprint for warhead-grade material, which must be enriched to 93%.
Iran claims it needs 20 percent enriched uranium for medical isotope research, but nuclear proliferation experts say Tehran has enriched far more uranium to 20 percent than that would require - and does not posess a sufficiently robust nuclear medicine research program to justify the claim.
"We hope the package that we put on the table is attractive to them so they will react positively," Mann told reporters. "It's up to them to react."
Hours later, Iran offered a counterproposal that includes what one member of its negotiating team called "nuclear and non-nuclear issues."
Officials refused to discuss details of the plan, saying it would be discussed in private meetings with diplomats from the European Union and China, an Iranian ally.
The Iranian official, who spoke on condition of anonymity to discuss the sensitive talks, predicted negotiations would continue on Thursday.
Iranian envoys telegraphed their goal for the Baghdad talks: agreements to lessen, or at least delay, sanctions that have targeted Iran's critical oil exports and cut off the country from lucrative European markets.
Tehran this week tentatively agreed to allow UN inspectors to restart probes into a military base with suspected links to nuclear arms-related tests.
While P5+1 diplomats expressed cautious optimism about the still-unsigned deal with the International Atomic Energy Agency, Israeli Defense Minister Ehud Barak expressed skepticism saying Iran was merely trying to "create the impression of progress."
The agreement is not expected to have a tangible bearing on the current round of talks.
The Obama administration has been vague about its immediate goals, with officials saying the talks will "gauge Iran's seriousness and explore elements of a possible agreement."
In addition to pressure from Jerusalem, Obama faces pressure from US lawmakers to take a hawkish stance on Iran as well.
In an op-ed piece in Wednesday's edition of the Wall Street Journal, Republican Sens. John McCain and Lindsey Graham, and Independent Joe Lieberman, urged the President "to leave no doubt that the window for diplomacy is closing."
"The Iranian regime's long record of deceit and defiance should make us extremely cautious about its willingness to engage in good-faith diplomacy," the senators wrote. "The U.S. must be prepared, if necessary, to use military force to stop Iran from getting a nuclear-weapons capability."
Earlier this week, the Democrat-majority US Senate backed proposals for further sanctions on Iran, including requiring companies listed on US stock exchanges to disclose any Iran-related business.