In the first public, high-level, face-to-face talks since 1980, American and Iranian envoys are due to meet in Baghdad on May 28 to discuss the security situation in Iraq. This important development signals a shift in both the US and Iranian policy. It is almost an admission that they need each other. The road to reconciliation, however, is likely to be long and hard.
The climate for a fruitful dialogue has been soured by the arrest and incarceration in Tehran's Evin prison of a prominent Iranian-American academic, Haleh Esfandiari, head of the Middle East programme at the Woodrow Wilson International Centre for Scholars - one of the rare non-partisan think-tanks in Washington.
The paradox is that Esfandiari, who has lived in the US for the past 26 years, has been a consistent advocate of US-Iranian dialogue. She had come to Tehran to visit her 93-year-old sick mother.
On her way back to the airport last December, she was stopped by masked men, placed under house arrest and imprisoned on May 2 on a charge of threatening national security.
She may be a victim of a struggle in Iran between moderates and hard-liners. Her arrest has severely damaged Iran's reputation in the West - hardly a situation Iran might welcome in its current propaganda war with the United States.
Iran and the US are at odds over subjects ranging from Iraq to Iran's nuclear ambitions. The US has a desperate need to stabilise the situation in Iraq.
Iran's interests are very different. It is anxious to secure international recognition that the political order in Iraq will henceforth be dominated by the majority Shiite community - the first time this has happened since Britain created the modern Iraqi state under Sunni leadership in 1920-21.
Iran suspects the US of trying to bring the Iraqi Ba'athists back on to the political scene, the same hated Ba'athists who fought Iran to a standstill in an eight-year war (1980-88) at a cost of perhaps one million dead. Iran's ambition is to see the emergence of a stable - but not too strong - Iraqi state under friendly Shiite leadership.
Iran believes this can best be achieved by the withdrawal from Iraq and the Gulf of the American military presence which it blames for causing chaos as well as fuelling a Shiite-Sunni war.
Both Iran and the US have been courting the Gulf states. Iran's President Mahmoud Ahmadinejad paid a historic visit to the United Arab Emirates earlier this month, hot on the heels of a visit by the US Vice-President Dick Cheney.
Iran is expanding its uranium enrichment plant at Natanz for what it claims are purely peaceful purposes. But the US suspects that Iran's civilian nuclear activities are a cover for a secret military programme.
"All options are on the table," the US has often said - a veiled reference to a possible resort to military action. According to a recent poll, 71 per cent of Israelis would favour a US military attack on Iran if diplomacy fails to halt its nuclear activities.
Pressure
No doubt bowing to pressure from AIPAC - Israel's lobby in the US - Barack Obama, a Democratic presidential hopeful, has introduced the Iran Sanctions Enabling Act in the US Senate which would require the Federal Government to publish a list of companies investing more than $20 million in Iran's energy sector.
A similar bill is being presented in the House of Representatives by New York Congressman Barney Frank.
As Iran has ignored the UN deadline to suspend uranium enrichment, President Bush last week threatened Iran with stiffer sanctions under a third UN Security Council Resolution now being drafted.
Meanwhile, however, Ali Larijani, Iran's chief nuclear negotiator, is to meet Javier Solana, the European Union's foreign policy chief, for a new round of talks on May 31.
As if to blunt criticism of Iran in the US and Israel, Larijani declared last week that Iran had no intention of destroying Israel and that the allegation that it was planning to "wipe Israel from the map" was an invention of the Western media. The prompt release by Iran of Esfandiari would also greatly improve the climate for negotiations.
Both the US and Iran should end their propaganda war and get down to serious talks. They need to resume diplomatic relations so as to allow for wider and more sustained contact. The US is at a grave disadvantage by not having a diplomatic presence in Tehran.
Patrick Seale is a commentator and author of several books on Middle East affairs.