ANALYSIS-Obama likely to take cautious approach on Iran

By Sue Pleming

WASHINGTON, Jan 26 (Reuters) - U.S. President Barack Obama's outreach to Tehran is likely to be cautious ahead of June elections in Iran despite a promise in his inaugural address to engage anyone "willing to unclench your fist."

The Obama administration is reviewing U.S. policy toward Iran but analysts expect no immediate shift in the current strategy to rein in Tehran's nuclear activities -- with more sanctions likely and small steps toward dialogue.

"You don't suddenly rush out and try to get everything done in the first 100 days. One of the keys will be to test the parameters of a dialogue," said Anthony Cordesman of the Center for Strategic and International Studies think-tank.

The review will look at all aspects of Iran policy, from a possible low-level diplomatic presence in Iran to the correct mix of incentives and pressure to get Tehran to give up uranium enrichment the West says is aimed at building a nuclear bomb. Iran says its nuclear program is for power generation.

"We're looking for ways that we can engage the Iranian people. The interests section is something that's under review as well," said State Department spokesman Robert Wood, referring to a diplomatic office the Bush administration decided "in principle" to open in Tehran but left up to Obama.

Middle East expert Jon Alterman said a first step could be to allow informal contacts between lower-level U.S. diplomats rather than a "big, bold" shift. There would likely also be more cultural and sporting exchanges.

"A lot depends on what happens in Iran domestically," said Alterman, referring to the June election in Iran.

An early indicator of the U.S. approach will emerge next week when the State Department's point person on Tehran, Bill Burns, is set to meet senior officials from major powers China, Russia, Britain, France and Germany to discuss Iran strategy.