The fiery Iranian president, who only a few months ago was seen as a virtual shoo-in for re-election, remains deeply unpopular among Iranian elites. If his increasingly impoverished populist base abandons him, as well, the result could be the return to power of former president Mohammad Khatami or some other pragmatist. That, in turn, along with persistent economic pressure on Iran, could open the door to a broader deal—the "surge of diplomacy" that Obama advocated during the campaign. A prerequisite here would be more help from Russia, which also finds its strategic position weakened by the drop in energy prices.

If all this can be achieved—a very big "if," granted—and Iran agrees to curtail its support for Hamas and Hizbullah as part of any deal, the desperate calculus in the Palestinian territories could change, too. Fatah could gain new credibility while Hamas withers. Iran's supreme leader, Ayatollah Ali Khamenei, indicated in a speech to Tehran University last Sunday that his country was not eager for an agreement now, in part because America's low status in the Middle East gives Iran an opportunity to achieve its dreams of regional dominance, pointing up "the might and the enduing grandeur of the Islamic System." But if the 69-year-old Khamenei, who is said to be subject to depression and may also be suffering from prostate cancer, is forced to rethink his country's strategic position in the Mideast, then he may decide that discretion—and compromise—is the better part of Islamic revolutionary valor. Many Iran experts believe it is possible that once Khamenei goes, he may replaced not by another supreme leader but by a shura council that might be more willing to negotiate.

In other words, the oil card could change what has been a losing hand for the United States and Israel into a winning one. There are plenty of pitfalls, of course. The same global economic crisis that has undermined Iran's position, for example, has probably made a U.S. (and therefore Israeli) military option even less likely, since Obama knows that a new Mideast war would send oil prices soaring again and set back economic recovery. And Iran's Islamic regime has backed away, again and again, from initiatives to open up new relations with the United States; the putative threat of the "Great Satan" remains part of the ideological glue that secures the Islamists's hold on power.

But as I discovered during a trip to Iran a year and a half ago, a substantial if largely silent faction of pragmatists can still be found in Tehran. They have grown weary of their country's economic and political isolation. The U.S. strategy must be to encourage these people, whose hopes for rapprochement were shattered in 2003 when the Bush administration ignored a moderate trial balloon for a deal floated through the Swiss. "If America pursues a different approach than confronting Iran, our dealings will change fundamentally," Mohsen Rezai, a former Revolutionary Guards general and secretary of the Expediency Council, told me then. My conversations with him, and other reformers inside Tehran, also suggested that under the right circumstances, Iran may still be willing to stop short of building a bomb. "Iran would like to have the technology, and that is enough for deterrence," S. M. H. Adeli, Iran's moderate, urbane former ambassador to London, said.

I don't necessarily buy this, but my 10-day reporting trip to Iran did convince me that this is no monolithic terror state. A genuine pluralism of opinion exists there. And like any country, Iran's leaders—the right leaders, that is—might just be responsive to the right mix of coercion and negotiation. But this must be deftly done: If Obama does nothing more than to adopt the stance that his incoming secretary of state, Hillary Clinton, embraced during the primaries, merely threatening to "totally obliterate" Iran, it won't work. Instead, as Ray Takeyh of the Council on Foreign Relationswrote in The Boston Globe on Wednesday, the United States must offer Iran "an opportunity to emerge as a leading regional state so long as it tempers its nuclear ambitions and restrains its destructive regional policies." The goal must be to give the pragmatists and reformers enough ammunition to contain and divide the hard-liners. "If the world does what it needs to do in 2009, there is a significant, or a not insignificant, chance that the Iranians will have to make tough decisions," says Meridor. The alternative is too grim to even think about. "We're currently in a situation where Iran has two bases of terror, one in Lebanon called Hizbullah, the other in Gaza called Hamas," Meridor says. "Together they have more than 20,000 rockets covering all of Israel. This threat is growing. The smuggling of explosives and weapons to Gaza is continuing."

Israel, and the West, desperately need a "game changer," to use a favorite Obama phrase. Perhaps it will be oil. Out of economic calamity could come a new approach to peace. It's not much, but it may be all we have left to try.

© 2008