Iran hopes for positive U.S. policy change

By Stella Dawson and Emma Thomasson

DAVOS, Switzerland (Reuters) - Iran promised a positive response on Thursday if the United States makes genuine policy changes and held out hopes of a breakthrough in a long-running dispute over its nuclear ambitions.

Tehran's comments brought international security to the fore on the second day of the World Economic Forum, which has been dominated by fears over financial instability in the worst global economic crisis in 80 years.

In new signs of the deepening economic woes, Turkey and the International Monetary Fund failed to break an impasse over a loan deal in talks at Davos, and Russian state bank VEB said Russian companies had asked it for $90 billion in aid.

Britain's Guardian newspaper reported U.S. officials were drafting a letter to Tehran from President Barack Obama aimed at unfreezing relations and opening the way to direct talks.

The U.S. State Department has been working on drafts of the letter since Obama was elected in November, the report said. It was a response to a letter of congratulations sent by Iranian President Mahmoud Ahmadinejad after Obama's victory.

"Most parts of the Islamic world unfortunately have been suffering because of past U.S. administrations," Iranian Foreign Minister Manouchechr Mottaki told delegates in Davos.

"If President Obama is determined to change these policies certainly he will face the welcome of the Islamic world."

He said he hoped the U.S. stance on Iran's nuclear program would be among Obama's changes of policy.

DIRECT DIALOGUE?

Western powers fear Iran wants to develop nuclear weapons under the cover of a civilian atomic program. Tehran says its program is intended only for peaceful power generation.

In Berlin, the German Foreign Ministry said senior officials from the United States, Russia, Britain, France, Germany and China would discuss the nuclear dispute in Germany next week.

The head of the U.N. nuclear watchdog welcomed Obama's overtures and called for direct talks without conditions.

"It is the way to go. It is long overdue," Mohamed ElBaradei, the head of the International Atomic Energy Agency (IAEA), said in Davos. "The security issue will not be resolved without direct dialogue between Iran and the U.S.."

But Israel doubted Iran's intentions, blaming them for the recent crisis in Gaza. President Shimon Peres said: "The problem is the Iranian ambition to rule the Middle East."

Former Prime Minister Benjamin Netanyahu, front-runner ahead of a February 10 election was even more blunt.
"The biggest issue facing our time is not the extent of the current financial crisis," he said.

"If there is one mission we have to put before us it is to prevent the arming of Iran with nuclear weapons, that would also enable us to neutralize Iran's proxies."

FEARS OF PROTECTIONISM

The overall mood at the annual Davos meeting of policymakers and business executives is gloomy.

India's trade minister, Kamal Nath, said the global economic crisis could fuel protectionism to safeguard national industries and jobs. Such protectionism, if it led to retaliation, would intensify the downturn, he said.

"We do fear this because one must recognize that at the heart of globalization lies global competitiveness, and if governments are going to protect their non-competitive production facilities it's not going to be fair trade," Nath told Reuters.

The crisis, which stemmed from a collapse in the U.S. housing market and led to a credit freeze, has prompted billions of dollars to be spent on bank bailouts and economic stimulus packages.

It has also led the IMF to prop up a number of particularly hard-hit countries.

Turkish Prime Minister Tayyip Erdogan said he had long discussions with IMF First Deputy Managing Director John Lipsky on Wednesday but he cast doubt on prospects of a swift deal.

Official talks were suspended on Monday for 10 days to try to clear obstacles to a stand-by deal, expected to amount to about $25 billion, to help Turkey weather the crisis.

FIXING THE SYSTEM

Policymakers are working behind the scenes in Davos on ways to fix the financial system, ahead of a summit of the G20 group of leading developed and developing countries in April and a G8 summit in July.

Russian markets have been among the hardest hit as foreign investors have fled. Russian companies have made bids for about $90 billion in help from state corporation VEB to restructure foreign debts, VEB chairman Vladimir Dmitriev told reporters.

For full coverage, blogs and TV from Davos go to www.reuters.com/davos

(Writing by Timothy Heritage; editing by Guy Dresser and Erica Billingham)