Obama pledges diplomacy with Iran, but no Rouhani meeting

By Matt Spetalnick and Yeganeh Torbati

UNITED NATIONS (Reuters) - U.S. President Barack Obama on Tuesday cautiously embraced overtures from Iran's new president as the foundation for a possible nuclear deal, but a meeting between the two leaders failed to materialize, underscoring entrenched distrust that will be hard to overcome.

In a speech to the United Nations General Assembly, Obama said he was determined to test President Hassan Rouhani's recent diplomatic gestures and challenged him to take concrete steps toward resolving Iran's long-running nuclear dispute with the West.

But in a sign of the difficulties the two countries face in trying to seize a historic opening, U.S. and Iranian officials were unable to orchestrate a much-anticipated handshake between the leaders on the U.N. sidelines in New York.

Even a brief encounter would have been symbolically important given that it would be the first direct contact between U.S. and Iranian heads of government since before the 1979 Islamic revolution that ousted the U.S.-backed shah.

"There will be no meeting," a senior U.S. official said. "We indicated that the two leaders could have had a discussion on the margins if the opportunity presented itself. The Iranians got back to us. It was clear that it was too complicated for them to do that at this time given their own dynamic back home."

Rouhani's recent gestures, including agreement to renew long-stalled talks with world powers on its nuclear program, have raised hopes for a thaw in relations between Washington and Tehran after a long period of estrangement.

But even as Obama welcomed signs of a "more moderate course" by Iran, Israeli Prime Minister Benjamin Netanyahu said the world should not be fooled by Rouhani's "soothing words." The Israeli leader said Iran was trying to mask its continued quest for a nuclear bomb, something Tehran denies it is seeking.

"Conciliatory words will have to be matched by actions that are transparent and verifiable," Obama told the annual gathering of world leaders in New York.

Differences over Iran's nuclear program and skepticism about Rouhani's intentions, especially from U.S. lawmakers and close U.S. ally Israel, have cast doubt on the prospect for any immediate breakthrough between Washington and Tehran.

Seeking to keep expectations under control, Obama said suspicions between the two countries were too great to believe their troubled history can be overcome overnight.

"The roadblocks may prove to be too great but I firmly believe the diplomatic path must be tested," Obama said.

Obama suggested that Rouhani's overtures could provide the basis for an elusive deal to curb Iran's nuclear ambitions and said he had instructed Secretary of State John Kerry to press a diplomatic effort along with other world powers.

But Obama stopped short of offering any concessions such as a softening of sanctions that have crippled Iran's economy.

There had been feverish speculation that Obama and Rouhani might greet each other in passing at a U.N.-hosted luncheon but the Iranian president skipped it. The reason was because alcohol was served with the meal, according to Press TV, Iran's English-language broadcaster.

(Additional reporting by Steve Holland, Jeff Mason, Arshad Mohammed, David Brunnstrom, John Irish and Louis Charbonneau at the United Nations and Dan Williams and Maayan Lubell in Jerusalem; Writing by Matt Spetalnick; Editing by Jim Loney)

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