If chosen, Power, an outspoken defender of human rights who wrote a study of the U.S. government’s failure to prevent genocide in the 20th century, could become a strong voice in the administration for a more muscular U.S. role in protecting rights in such places as Syria, China and Sudan.

The sources said Power was a candidate to serve as under secretary of state for civilian security, democracy, and human rights, a post that oversees the department’s work in areas ranging from counterterrorism to democracy promotion.

“That is a strong possibility,” said one source, who is in regular contact with the State Department, of Power’s possible nomination by U.S. President Barack Obama. The source, who spoke on condition of anonymity, cautioned it was always possible that someone else could be selected in the end.

The White House and the State Department declined comment on the possibility of Power’s nomination.

After covering the Balkan wars of the 1990s as a journalist, Power won the Pulitzer Prize for her book “A Problem from Hell: America and the Age of Genocide,” a study of U.S. policy responses to genocide during the 20th century.

Should she be nominated, it would be a revival of sorts for the Harvard Law School-trained lawyer, who resigned as an adviser to Obama’s 2008 campaign after calling his Democratic rival Hillary Clinton a “monster.”

Power stepped down after the British newspaper The Scotsman quoted her as saying of Clinton: “She is a monster, too – that is off the record – she is stooping to anything.”

Obama subsequently named Clinton as his secretary of state during his first term in office, while Power joined the White House as senior director for multilateral affairs and human rights on the national security staff.

While her White House job had a relatively low profile, Power was widely reported to have argued for the U.S. decision to intervene militarily in 2011 to support the rebels who eventually toppled long-time Libyan dictator Muammar Gaddafi.

Should Power, who left the White House earlier this year, move to the State Department as under secretary for civilian security, democracy and human rights, she is likely to have a higher public profile.

That post oversees the State Department offices that handle conflict and stabilization operations; counterterrorism; democracy, human rights and labor; international narcotics and law enforcement; and population, refugees and migration; human trafficking and global criminal justice.

In February, the website of Foreign Policy magazine cited several sources as saying Power could return to government to replace Maria Otero as the under secretary of state for civilian security, democracy, and human rights.

(Reporting by Arshad Mohammed and Warren Strobel; Editing by Lisa Shumaker)

Obama, who last year declared that the use or deployment of chemical weapons by Syrian President Bashar al-Assad would cross a “red line,” told a White House news conference there is evidence those weapons were used, but that there is still much U.S. intelligence agencies do not know.

“We don’t know how they were used, when they were used, who used them,” he said, and, “We don’t have a chain of custody that establishes what exactly happened.”

Obama did not rule out action – military or otherwise – against Assad’s government. But he repeatedly stressed he would not allow himself to be pressured prematurely into deeper intervention in Syria’s two-year-long civil war.

The president’s remarks raised the prospect that, despite declaring last week that there is evidence Assad has used the nerve agent sarin “on a small scale,” any U.S. government response will not be quick.

Obama’s press secretary Jay Carney told reporters on Monday that there is no deadline for rendering a final judgment on whether chemical weapons were used, and by whom. “I would not give you a timetable,” Carney said.

Privately, U.S. officials predict it will be weeks before any conclusion is reached.

Syria denies using chemical weapons.

‘FRAGMENTARY’ EVIDENCE

Obama administration officials have not specified what “physiological” evidence they have that Syrian forces used sarin, but government sources said it includes samples of blood from alleged victims, and of soil.

The evidence is “fragmentary” at best, but appears to indicate the use of sarin on two occasions, said a European national security official who spoke on condition of anonymity.

Since the Syrian conflict erupted in 2011 – it has killed 70,000 people and created more than 1.2 million refugees – Obama has repeatedly shied away from deep U.S. involvement.

That stance is shared by top Pentagon officials, who have spoken publicly and privately of their concerns about the limits and risks of employing U.S. military force in the shattered country.

Whether Obama is now slowly moving toward a more activist approach is unclear. He faces criticism for softening a “red line” that seemed crystal clear when he said in August that the use of chemical weapons by Assad, or transfer of stockpiles to extremist groups would be unacceptable.

White House officials said they do not think the U.S. public is eager to get involved militarily in Syria.

“Setting aside instances when America has been attacked – the Japanese and al Qaeda – military action should always be something any president considers very seriously and deliberately and that’s especially the case when it’s not an attack on the United States,” a senior White House official said.

A New York Times/CBS News poll released on Tuesday found that 62 percent of Americans say the United States has no responsibility to do something about the fighting between Assad’s forces and anti-government rebels.

Only 39 percent of respondents said they were following the Syrian violence closely, indicating it is not among U.S. citizens’ top concerns.

“I think the American people are kind of where the president is. You’ve got to have some definitive evidence and you’ve got to very careful about what you do,” said Democratic strategist Bob Shrum, who managed John Kerry’s 2004 presidential campaign.

“The politics of this is not hard for the president. It’s the policy that’s hard,” Shrum said.

Obama also has room for maneuver on Syria because Republican are divided over what to do, and – unlike with Iran’s nuclear program – close U.S. Middle East ally Israel is not urging American action.

Some prominent Republicans, including senators John McCain of Arizona and Lindsey Graham of South Carolina, cited the chemical weapons evidence to renew their calls for action such as establishing a no-fly zone to neutralize Syria’s air defenses.

But not all Republicans share that view. Departing from his party’s frequent disparagement of the United Nations, Representative Harold Rogers of Kentucky replied when asked if Washington should arm the Syrian rebels: “It is such a muddled picture. I think probably we ought to be asking the U.N. to be involved.”

The Republican divide “leads to an incoherent critique of the administration’s policy,” said Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies think tank.

There is also “the long hang-over from Iraq” and the U.S. war there, Alterman said. “I don’t know when that goes away.”

Michael Oren, Israel’s ambassador to the United States, said his country is not calling on Obama to act against Syria.

“We’re not making any policy recommendations,” Oren said in a telephone interview. “We think the issue is very complex.”

At his news conference, Obama insisted that “I’ve got to make sure I’ve got the facts” before declaring that the red line was crossed.

“If we end up rushing to judgment without hard, effective evidence, then we can find ourselves in the position where we can’t mobilize the international community to support what we do,” he said.

Said Alterman: “Obama is looking for an opportunity to be decisive” in Syria. “You could either see it as reluctance, or patience.”

(Additional reporting by Patricia Zengerle, Mark Hosenball and Tabassum Zakaria; Editing by Alistair Bell and Mohammad Zargham)

The source said the FBI’s dealings two years ago with Tamerlan Tsarnaev occurred following a request from an unidentified foreign government.

The FBI did not produce any “derogatory” information on Tsarnaev and agents then put the matter “to bed,” said the source, who spoke on condition of anonymity.

Tamerlan Tsarnaev died overnight in Boston in a shootout with police. His younger brother, Dzhokhar, was taken into custody on Friday evening in the Boston suburb of Watertown after a dramatic, day-long manhunt, Boston police said.

The revelation that the elder Tsarnaev was on U.S. law enforcement authorities’ radar screens seemed likely to raise uncomfortable questions for the Obama administration about whether it could have done anything to detect and stop the plot.

“It’s new information to me and it’s very disturbing that he’s on the FBI radar screen,” Rep. Michael McCaul, Texas Republican and chairman of the House Homeland Security Committee, said on CNN late Friday.

It is not known when the Boston Marathon bombings were planned, or whether there were clues that could have allowed authorities to pre-empt it.

National security and law enforcement authorities said on earlier Friday that they had not turned up any evidence that the Tsarnaevs had contacts with al Qaeda or other militants overseas. The brothers were in the United States legally.

The officials said they were leaning toward the theory that the bombings were motivated by Islamic extremism, although that remained unproven.

WERE THE TSARNAEVS WORKING WITH OTHERS?

Violent plots involving a single individual or small groups who self-radicalize and have minimal dealings with other militants can be extremely difficult to detect in advance, according to U.S. counterterrorism officials and private experts.

The revelation about the FBI contacts with the elder Tsarnaev came as U.S. officials told Reuters that investigators are scouring government data banks to determine if spy and police agencies missed potential clues that might have alerted them to the two brothers, originally from the Russian republic of Chechnya.

Another top priority for investigators is to determine whether the brothers had any confederates either inside the United States or overseas, one U.S. official said. This official and others spoke on condition of anonymity to discuss an ongoing investigation.

Three people were taken into custody for questioning in New Bedford, Massachusetts, police said on Friday. Two men and a woman are being questioned by the FBI “on the assumption there is an affiliation with” Tsarnaev, Lieutenant Robert Richard of the New Bedford Police said.

One official said the possibility that the U.S. government had information that should have raised questions about the Tsarnaev brothers before the attack could not be ruled out. Other officials said they were unaware that such material had turned up.

In several recent cases, U.S. intelligence and law enforcement agencies failed to put together clues that, in hindsight, might have led them to pre-empt a plot.

In 2009, U.S. Army Maj. Nidal Hassan killed 13 people and wounded another 32 at Fort Hood, Texas. Prior to the shooting spree, Hassan had email contacts with Anwar al-Awlaki, the U.S.-born cleric and leader of al Qaida’s affiliate in Yemen who was later killed in a U.S. drone strike.

U.S. authorities had investigated Hassan’s emails, but concluded they posed no threat of violence.

The father of Umar Farouk Abdulmutallab, the so-called “underwear bomber” who tried to bring down a U.S. jetliner over Detroit on Christmas Day 2009, reported suspicions about his son’s activities to the U.S. Embassy in Nigeria. But Abdulmutallab’s U.S. visa was never revoked.

A report by the Senate intelligence committee heavily criticized U.S. intelligence agencies for failing to act on available information in that case.

But Brian Jenkins, a respected terrorism expert at the RAND Corp., dismissed the idea that the Boston bombings represented an intelligence failure.

People will inevitably ask, “did we miss something in intelligence?” said Jenkins, speaking before the news of the 2011 FBI interview with Tamerlan Tsarnaev become public.

“Some people will label it an ‘intelligence failure.’ But that’s because people have come to expect 100 percent security,” he said.

(Additional reporting by Patrick Temple-West; Editing by Paul Simao and Stacey Joyce)

Yet on Thursday, the United States sent a pair of the
bat-winged planes on a first-of-its-kind practice run over the
skies of South Korea, conducting what U.S. officials say was a
diplomatic sortie.

The aim, the officials said, was two-fold: to reassure U.S.
allies South Korea and Japan in the face of a string of threats
from North Korea, and to nudge Pyongyang back to nuclear talks.

But whether North Korea’s young new leader, Kim Jong-un,
interprets the message the way the White House hopes is
anybody’s guess. His first reaction, according to North Korean
state media, was to order his country’s missiles ready to strike
the United States and South Korea.

A senior U.S. official said Kim’s late father, Kim Jong-il,
was at least more predictable: He would issue threats that got
the world’s attention without provoking open conflict, and then
use them as leverage in subsequent diplomatic negotiations.

This time, U.S. intelligence analysts are divided over
whether Kim Jong-un is pursuing the same strategy. “It’s a
little bit of an ‘all bets are off’ kind of moment,” said the
official, who spoke on condition of anonymity,.

The official said the idea for the practice bombing run,
part of annual U.S.-South Korean military exercises named Foal
Eagle, emerged from government-wide discussions over how to
signal to Seoul and Tokyo that Washington would back them in a
crisis.

It is less clear whether Washington informed China, North
Korea’s neighbor and only major ally, in advance.

The plan was approved by the White House and coordinated
with South Korea and Japan, the official said.

REASSURING ALLIES

While the 20-year-old B-2 often flies for long durations -
44 hours is the record – Thursday’s flight of approximately
37-1/2 hours was the plane’s first non-stop mission to the
Korean peninsula and back from Whiteman Air Force Base in
Missouri, Air Force officials said.

With Pyongyang threatening missile strikes on the U.S.
mainland, as well as U.S. bases in Hawaii and Guam, the flight
seemed designed to demonstrate how easy it would be for the
United States to strike back at North Korea.

It is far from clear that Pyongyang, which has had mixed
success in its missile tests, can make good on its own threats.

“This is useful reminder to the South Koreans that the U.S.
nuclear arm can reach out and touch North Korea from anywhere.
We don’t need to be sitting there at Osan Air Base,” south of
Seoul, said Ralph Cossa, president of the Hawaii-based Pacific
Forum CSIS think tank.

“This also reminds the Chinese that North Korean actions
have consequences. It tells them that the U.S. is taking North
Korean threats seriously but we’re not panicking,” he added.

The senior U.S. official said that once the Foal Eagle
exercises are concluded, the Obama administration hopes to pivot
to a diplomatic approach to North Korea, and hopes Pyongyang
will reciprocate.

U.S. Secretary of State John Kerry is expected to travel to
East Asia in about two weeks, the first of a parade of senior
Washington officials headed toward the region.

45-MINUTE NAPS

Thursday’s drill was a rare moment in the limelight for the
B-2 “Spirit” bomber, which began life with a slew of cost and
development troubles for manufacturer Northrop Grumman Corp
but has become a mainstay of U.S. nuclear deterrence.

Long-duration missions, in which the bomber is refueled in
midair, are “a challenge on your body and mind, staying sharp,”
said an Air Force captain and B-2 pilot. Under the service’s
security rules, the pilot could only be identified by his radio
call sign, “Flash.”

The captain, who did not participate in Thursday’s practice
mission over South Korea, said flight doctors have devised
special regimens to keep the plane’s two-man crew sharp.

They include 45-minute naps, on a cot in the back of the
plane, that end a half hour before “critical events” such as
in-air refueling or dropping ordinance, he said.

All 20 of the United States’ B-2 bombers are based at
Whiteman, and they saw combat during the U.S. invasion of Iraq
and the NATO mission that led to Libyan leader Muammar Gaddafi’s
overthrow.

In the 1980s, the Pentagon had planned to buy 132 of the
bombers, whose main mission was to penetrate the Soviet Union’s
airspace undetected. The program was drastically cut back after
the Berlin Wall collapsed in 1989.

So elite is the B-2 pilot corps that more people have been
in outer space than have flown the aircraft, “Flash” said.

A Japanese government source said Tokyo could act within the
next two to three weeks. Australian Foreign Ministry sources
said Canberra might also unveil sanctions soon.

A senior U.S. official said the Obama administration was
trying to convince other governments to crack down on the bank
after Washington announced its own measures this month.

Washington had urged the European Union to take action, a
State Department official said on Monday. David Cohen, the U.S.
Treasury undersecretary for terrorism and financial
intelligence, told reporters he raised the issue of the bank
with Chinese officials in Beijing last week, although he did not
say what their response was.

Experts said the U.S. move was designed to make foreign
banks that do business in the United States think twice about
dealing with the Foreign Trade Bank, much the same way banks
have become wary about having ties with financial institutions
in sanctions-hit Iran.

“It was obvious to us, fairly early on, that this bank is
key to the North Korean ability to finance and fund” their
nuclear and ballistic missile programmes, said the senior U.S.
official, who spoke on condition of anonymity. “And so it was
decided it would make sense to do everything we could to put
pressure on their proliferation efforts and their WMD (weapons
of mass destruction) efforts by putting pressure on this bank.”

Not much is publicly known about the bank. One South Korean
expert said it also handled legitimate trade and investment with
China. The State Department official said some EU countries with
embassies in Pyongyang used the bank for embassy business.

Washington had asked the U.N. Security Council to include
the bank in fresh sanctions imposed on North Korea for its Feb.
12 nuclear test, but China and Russia were opposed, said the
senior U.S. official and U.N. diplomats. They did not say why
Beijing and Moscow rejected the proposal.

Neither Russia’s U.N. mission in New York nor China’s had an
immediate comment. Russia and China each wield vetoes in the
Security Council.

The United States announced its unilateral measures against
the bank several days after the U.N. resolution was passed on
March 7. Washington’s measures prohibit any transactions between
U.S. entities or individuals and the North Korean bank.

REPUTATIONAL DAMAGE

The Japanese government source with direct knowledge of the
matter said Tokyo was expected to announce sanctions once legal
documents were prepared.

“The (bank) doesn’t have a branch in Japan so the main
reason behind the move is an attempt to cause as much
reputational damage as possible,” the source said, referring to
any institutions that might be doing business with the bank.

In Canberra, Foreign Ministry sources said sanctions would
be applied to prevent Foreign Trade Bank operations in
Australia. Talks were under way with bank representatives, the
sources said, declining to say what the measures would be or
where the talks were taking place.

The office of Foreign Minister Bob Carr said that up to now
regulators had yet to find any record of a Foreign Trade Bank
branch in Australia. Australia has diplomatic ties with
Pyongyang. Japan does not.

“We are continuing to review our sanctions regime against
North Korea, including the further tightening of financial
sanctions,” said a spokeswoman for Carr.

The senior U.S. official indicated the American campaign was
not meant to be coercive, but rather aimed at explaining
Washington’s concerns about the bank and advising other
countries to take similar action. The United States took that
approach, warning other countries and banks of reputational
risk, in its drive to cut off Iran’s access to the global
financial system.

One expert said Washington was following up U.N. sanctions
with its own, tougher measures, which meant going after specific
entities and isolating them.

“Then countries have to decide whether they want to do
business with North Korea, or do business with the rest of the
financial community,” said Mark Dubowitz from the
Washington-based Foundation for Defense of Democracies, who has
advised the Obama administration on sanctions focused mainly on
Iran.

AS ALWAYS, CHINA THE KEY

The new U.N. sanctions tighten financial curbs on North
Korea, including the illicit transfer of bulk cash, and crack
down on its attempts to ship and receive banned cargo.

One of the challenges is stopping the transfer of bulk cash,
which U.N. diplomats say is one of Pyongyang’s preferred methods
of moving money – often in briefcases carried by its diplomats.
Sanctions on the Foreign Trade Bank could force North Korean
diplomats to carry more cash, exposing them to the risk of
capture, the Japanese government source said.

The success of the new U.N. measures depends to a large
extent on China, North Korea’s sole diplomatic ally and its
major trading partner.

However, China has become increasingly frustrated with North
Korea, Chinese experts have said. Besides the latest nuclear
test, North Korea launched a long-range missile in December and
has stepped up its rhetoric against the United States and South
Korea.

Cho Bong-hyun, an expert on the North Korean economy at the
IBK Economic Institute in Seoul, said China might act against
the bank but would not shut it down. China’s actions could
include limiting the bank’s activities in China, partly by
making it harder to transmit money, Cho said.

“The impact would be significant. It could mean the flow of
money through the bank would dry up. The key is China is not
likely to impose such actions indefinitely,” he said.

The State Department official, briefing reporters in
Brussels on Monday on condition he not be further identified,
said it was complicated for the EU to impose sanctions on the
bank because some European countries used it in Pyongyang.

Non-governmental organisations (NGOs) and humanitarian
organisations may also use the bank, he said, adding: “We are
not going after NGOs that do legitimate work.”

An EU source said the bank was not on the current EU
sanctions list. EU diplomats are expected to discuss additional
sanctions soon, the source said.

The senior U.S. official contrasted the effort against the
Foreign Trade Bank with the 2005 U.S. action against Macau-based
Banco Delta Asia (BDA), which Washington alleged handled illicit
funds for Pyongyang. Some $25 million in North Korean money was
frozen in that U.S. Treasury-inspired raid.

Unlike BDA, the Foreign Trade Bank is a domestic North
Korean institution.

“This is more an effort to impede their financial system’s
ability to operate” in the nuclear and missile sector, the
senior U.S. official said.

(Additional reporting by Rob Taylor in Canberra, Patricia
Zengerle and Anna Yukhananov in Washington, Louis Charbonneau in
New York, Adrian Croft in Brussels and Jack Kim in Seoul.
Writing by Dean Yates. Editing by Ian Geoghegan)

After nearly 10 months in limbo, tentative reconciliation efforts involving Taliban insurgents, the Karzai government and other major Afghan factions have shown new signs of life, resurrecting tantalizing hopes for a negotiated end to decades of war.

Pakistan, which U.S. and Afghan officials have long accused of backing the insurgents and meddling in Afghanistan, has recently signaled an apparent policy shift toward promoting its neighbor’s stability as most U.S. combat troops prepare to depart, top Pakistani and Afghan officials said.

In another potentially significant development, Taliban representatives met outside Paris last month with members of the Afghan High Peace Council – although not directly with members of the Karzai government, which they have long shunned.

U.S. officials, speaking on condition of anonymity, said the developments are promising – but that major challenges remain to opening negotiations, let alone reaching an agreement on the war-ravaged country’s political future.

Hopes for Afghan peace talks have been raised before, only to be dashed. Last March, the Taliban suspended months of quiet discussions with Washington aimed at getting the insurgents and the Karzai government to the peace table.

Obama is expected to press the Afghan president to bless the formal opening of a Taliban political office in the Gulf state of Qatar as a way to jump-start inter-Afghan talks.

Karzai has been lukewarm to the idea, apparently fearing his government would be sidelined in any negotiations.

TRIP AT A TURNING POINT

Karzai’s meeting with Obama, at the end of a three-day visit to Washington, is shaping up to be one of the most critical encounters between the two leaders, as the White House weighs how rapidly to remove most of the roughly 66,000 U.S. troops in Afghanistan and how large a residual force to leave after 2014.

Obama, about to begin his second term in office, appears determined to wrap up U.S. military engagement in Afghanistan. On Monday, he announced as his nominee for Pentagon chief former Nebraska Senator Chuck Hagel, who appears likely to favor a sizeable U.S. troop drawdown.

Other issues on the agenda have plenty of potential for causing friction: the future size and focus of the Afghan military; a festering dispute over control of the country’s largest detention center; and the future of international aid after 2014.

Karzai’s trip “is one of the most important ones because the discussions we are going to have with our counterparts will define the relations between (the) United States and Afghanistan,” Afghan Foreign Minister Zalmay Rassoul told the lower house of parliament this month.

No final announcement on post-2014 U.S. troop levels is expected during Karzai’s visit, and the issue is further complicated by Washington’s insistence on legal immunity for American troops that remain.

General John Allen, the top U.S. and NATO commander in Afghanistan, recommended keeping between roughly 6,000 and 15,000 U.S. troops in Afghanistan after 2014, but the White House is considering possibly leaving as few as 3,000 troops.

A U.S. official, speaking on condition of anonymity, said the White House had asked for options to be developed for keeping between 3,000 and 9,000 troops in the country.

PAST PEACE HOPES DASHED

Last year, the Obama administration hoped to kick-start peace talks with a deal that would have seen Washington transfer five Taliban prisoners from Guantanamo Bay prison. In return, the Taliban would renounce international terrorism and state a willingness to enter talks with Karzai’s representatives.

That deal never came off, and the question now is whether it, or an alternative peace process, can get under way as the U.S. military presence rapidly winds down.

Looking at developments in the last few months, “you could see that there are things happening,” said one U.S. official, who was not authorized to speak for the record.

At the end of 2012, Pakistan released four Afghan Taliban prisoners who were close to the movement’s reclusive leader, Mullah Mohammed Omar. It appeared to be a step toward meeting Afghanistan’s long-standing insistence that Islamabad free those who could help promote reconciliation. A senior Afghan official welcomed the release.

A member of Pakistan’s parliament closely involved in Afghan policy-making said there are signs of a shift in the thinking of Pakistan’s powerful military. Some in the military, which has long regarded Afghanistan as a battleground in its existential conflict with rival India, are now saying that the graver threat comes from Pakistan’s own militants.

“Yes, there is skepticism. The hawks are there. But the fact is that previously there were absolutely no voices in the army with this kind of positive thinking,” the parliamentarian said.

“Pakistan has also realized that there won’t be a complete withdrawal of the U.S. from Afghanistan,” the lawmaker said. “The security establishment realizes it has to compromise somewhere. Hence the Taliban releases. … Hence the statements from even the most skeptical Afghan officials that there is a change in Pakistani thinking.”

Ghairat Baheer, who represented the Hezb-e-Islami faction at last month’s peace talks in the Paris suburb of Chantilly, rejected a continued U.S. military presence in Afghanistan, but praised the Pakistan prisoner release as a sign of its good intentions.

WAITING FOR THE TALIBAN

After more than a year of frustration, Obama administration officials are skeptical about luring the Taliban to peace talks, citing what appears to be a deep fissure within the movement between moderates who favor entering the political process and hard-liners committed to ousting both NATO troops and Karzai.

The Taliban’s lead negotiator, Tayeb Agha, whom the Obama administration regards as a reliable interlocutor, offered to resign last month in apparent frustration, the Daily Beast website reported.

Taliban envoys have yet to meet officially with Karzai’s government, and the insurgents demand a rewriting of the Afghan constitution.

“I don’t think anyone knows where (reconciliation) stands. And I mean that because there are a lot of reconciliation talks and a lot of games that are being played in a lot of places,” said Fred Kagan, a military analyst at the conservative American Enterprise Institute.

“The likelihood of getting an acceptable deal that actually secures our interests is vanishingly small,” he said. “But the probability that you could get the deal and have it implemented in time to make this drawdown timeline make sense is nonsense.”

(Additional reporting by Phil Stewart and David Alexander in Washington, and Hamid Shalizi in Kabul. Editing by Christopher Wilson)

Clinton did not suffer a stroke or neurological damage as a result of the clot, the doctors said, adding that “she is in good spirits, engaging with her doctors, her family and her staff.”

The U.S. secretary of state, who has not been seen in public since December 7, was revealed on Sunday evening to be in a New York hospital under treatment for a blood clot that stemmed from a concussion she suffered in mid-December.

The concussion was itself the result of an earlier illness, described by the State Department as a stomach virus she had picked up during a trip to Europe and that led to her becoming dehydrated and fainting after she returned to the United States.

“In the course of a routine follow-up MRI on Sunday, the scan revealed that a right transverse sinus venous thrombosis had formed. This is a clot in the vein that is situated in the space between the brain and the skull behind the right ear,” Clinton’s doctors, Drs. Lisa Bardack and Gigi El-Bayoumi said in the statement released by the State Department.

“To help dissolve this clot, her medical team began treating the Secretary with blood thinners. She will be released once the medication dose has been established,” the doctors said. “In all other aspects of her recovery, the Secretary is making excellent progress and we are confident she will make a full recovery.”

Clinton has kept up a punishing schedule as the top U.S. diplomat, flying more than 950,000 miles to visit 112 countries and spending more than a quarter of her tenure – 401 days – on the road, according to the State Department.

Her health setbacks have forced her to cancel an overseas trip and postpone testimony to Congress regarding a report on the deadly attack on the U.S. diplomatic post in Benghazi, Libya. Her two deputies testified instead.

Clinton has said she intends to appear before Congress to discuss the attack – in which four Americans, including the U.S. ambassador to Libya, died – but it is unclear when she will be back at work.

The doctors gave no estimate of when she may go home from the hospital.

On Sunday, a State Department spokesman said Clinton was “being treated with anti-coagulants and is at New York-Presbyterian Hospital so that they can monitor the medication over the next 48 hours.”

(Reporting by Arshad Mohammed; editing by Todd Eastham)

So far, they have not. In response, the United States and the European Union this year took a step they had long resisted, imposing trade sanctions to choke off Iran’s lifeblood: oil revenue.

It was financial warfare, and it carried grave risks. Until recently, Iran was the world’s fourth largest exporter of oil, providing just under three percent of internationally traded supply. The campaign to take that oil off the market risked driving up world oil prices, disrupting the international payments system and stifling a fragile global economic recovery.

In interviews, senior U.S. and European officials described the intense diplomatic maneuvering they undertook to enact the sanctions without causing an oil shock.

Obama warned allies that oil sanctions were the only way to avert a new war between Israel and Iran. U.S. envoys pressed Iraqi, Libyan and, above all, Saudi officials to pump up their own crude supplies. Washington and its allies massaged skittish oil markets with carefully calibrated messages. U.S. diplomats journeyed to southern Iraq to inspect plans for new oil terminals that could help blunt the loss of Iranian shipments.

The challenge, American officials said, was to clamp down on Iran’s oil exports while mitigating the risks of an oil crisis.

“That is the needle we were trying to thread,” said a senior Obama administration official. “It was always a roll of the dice because we didn’t know what the reaction was going to be.”

In one sense, the calculated gamble paid off. Iran is losing billions of dollars in revenue every month and its currency has been crippled by both the sanctions and its own mismanagement. Its oil exports have fallen by 55 percent this year, according to the U.S. Treasury. Other producers have offset losses and the global oil price has actually fallen.

But there’s no evidence yet the pressure has had its desired effect: to convince Iran to stop spinning the centrifuges to enrich uranium that could be used in a nuclear bomb.

DECADES OF BAD BLOOD

U.S. sanctions on Iran are as old as the 33-year-long enmity between the two governments.

Tehran insists that its nuclear program is peaceful and that sanctions are unjustified. But in 2007, as questions about Iran’s nuclear program grew, the Treasury Department under President George W. Bush deployed a new strategy: blacklisting Iranian banks one by one, forcing foreign banks to decide whether to do business with Iran or the vastly larger U.S. economy.

The Treasury had used the maneuver to freeze North Korean assets in Macao’s Banco Delta Asia in 2005, effectively making it radioactive to other banks.

“There was a very conscious decision: let’s see if we can replicate this in the case of Iran,” said Daniel Glaser, Assistant Secretary of the Treasury for Terrorist Financing.

Treasury officials traveled the globe, carrying reams of financial intelligence. They spoke “the language of risk” to bankers and governments, Glaser said, seeking to persuade them to make Iran a financial pariah.

Iran has found ways around some of the measures. Reuters has documented how Iran obtained millions of dollars’ worth of embargoed U.S. tech components for its telecommunications industry via Chinese, Middle Eastern and Iranian firms; how it changes the names and flags on its ships to get around other embargoes; and how it has masked oil sales.

Neverthless, sanctions are hurting – and this year has been crucial.

The final straw that made oil sanctions possible was a January 2011 diplomatic blow-up in Turkey.

Top envoys from the world’s five most powerful nations and Germany gathered in Istanbul to meet an Iranian delegation. They wanted to know if Iran might take a fresh look at a 15-month-old proposal: Iran would ship out much of its enriched uranium in exchange for fuel for the U.S.-supplied Tehran Research Reactor that produces medical isotopes.

If Tehran agreed, it would give up a type of fuel which, if further refined, could yield fissile material for bombs. In return, the Iranians would get something they wanted – reactor fuel – and, perhaps, a face-saving way to begin wider nuclear negotiations.

But Iranian negotiators at the Istanbul talks struck an uncompromising stance, and what a senior U.S. official described as a “peremptory” tone. The definitive rejection – after two years of Obama’s efforts to engage the Iranians – allowed Washington to persuade the EU, Russia and China it was time for tougher sanctions.

“They had stiffed us on diplomacy at this point,” said Dennis Ross, a top White House adviser at the time. “They had completely stiffed us.”

‘THE NUCLEAR OPTION’

Late last year, U.S. senators crafted legislation meant to take direct aim at Iran’s oil revenues. They wanted to give Obama the power to sanction foreign banks, including the central banks of allies, if they dealt with the Central Bank of Iran (CBI) to buy or sell oil.

But Obama’s team – including senior officials within the Treasury Department – was divided over whether oil sanctions would hurt Iran or the global economy more.

Targeting a central bank was considered an extreme step by many, not just the Obama White House. If botched, it could disrupt the international payments system managed by the world’s central banks. The idea had been debated but set aside by Bush.

“I vividly recall President Bush at numerous meetings beseeching his advisers to provide him new sources of leverage for pressuring Iran, and explicitly raising the idea of going after the CBI,” Bush adviser John Hannah wrote in May. “Equally vividly, I recall Treasury Secretary Hank Paulson shooting the idea down, labeling it the ‘nuclear option’ and direly predicting that it would wreak havoc on global markets and the U.S. economy.”

On November 15 last year, a senior Treasury official asked key senators, including New Jersey Democrat Robert Menendez and Illinois Republican Mark Kirk, to hold off introducing legislation.

Within days, the Republicans went ahead anyway, ultimately forcing Senate Democrats – with input from the Treasury, though not its formal blessing – to craft a compromise that would give Obama more flexibility to impose the sanctions.

The White House still hesitated. On November 29 it sent the number two officials from the State Department, the Treasury and the national security staff to ask senators to go slow on the legislation.

On December 1, Treasury Secretary Timothy Geithner wrote Senator Carl Levin, chair of the Senate Armed Services Committee, to register “strong opposition” to the legislation. He warned it might fracture U.S. allies’ solidarity on Iran and fuel Tehran’s suspected nuclear ambitions by driving up oil prices and thus Iranian revenue.

The issue came to a head when Treasury Undersecretary David Cohen testified before Congress that day. Menendez, a major proponent of strangling Iran’s oil revenues, told Cohen the administration’s maneuvers to delay action were “outrageous.”

The Senator gave Cohen no chance to respond. “I do not really have any questions for you. I just wanted to set the record straight here after you vitiated my amendment,” he said.

The Senate voted for Menendez’s amendment by 100 to 0. Obama officials said months later they were only seeking flexibility to minimize the risks in the new strategy.

“The debate at that time was over means, not ends,” Cohen said in an interview just under a year later.

On the last day of 2011, Obama signed the legislation into law.

“Now what we are talking about is full-blown economic warfare,” said Mark Dubowitz, head of the Foundation for Defense of Democracies, a conservative-leaning group that is among the most aggressive advocates of Iran sanctions.

FRENCH SPARK, GREEK WORRIES

Europe stood to lose far more than the United States if it throttled trade with Iran. U.S. commerce with Iran barely exists. EU nations did 27 billion euros ($36 billion) in trade last year, roughly 14 billion of that in oil imports.

But in late 2011, pushed by Israel’s repeated threat of a military strike on Iran’s nuclear facilities, the EU made its own moves toward oil sanctions, and more eagerly than the White House.

“We were scared to death Israel would attack,” said a senior European national security official.

There was also no sign of Iran’s nuclear program slowing. On November 8, the International Atomic Energy Agency reported that Iran had “carried out activities that are relevant to the development of a nuclear explosive device.” Iran, it said, was developing its own nuclear weapon design.

On November 21, French President Nicolas Sarkozy wrote to fellow leaders, urging sanctions on an “unprecedented scale,” including an oil embargo and a freeze on central bank assets.

The letter “lit a spark on a gunpowder trail that had been building for a long time,” said a senior Obama administration official.

Europe was suffering its worst financial crisis since World War Two, though, and it would take two months of painstaking negotiations to win backing from the entire bloc.

Many European governments were “hugely hesitant,” in the words of one Western diplomat. Greece had the biggest concern. Run by a caretaker government trying to stop the country tumbling into default, it enjoyed favorable purchasing terms from Iran, which would accept Greek letters of credit when many exporters apparently would not. Athens argued an embargo would bring deeper financial trouble.

“The Greeks didn’t have a government. They could never really tell you what their ultimate political decision was,” said one Western diplomat.

Athens wanted assurances that alternative supplies of oil would be secured. On the sidelines of meetings attended by Gulf diplomats, EU foreign policy chief Catherine Ashton urged the Saudis to step in. The Saudis, in turn, sought financial guarantees from the European Commission for selling oil to Greece, but got none. In the end, though, “they delivered,” one diplomat said.

In January 2012, EU diplomats met in Brussels to work out final details. Financial sanctions were a hang-up. Many European governments wanted to know how an asset freeze on Iran’s central bank would hurt trade in sectors other than oil.

Exemptions were introduced to safeguard legitimate trade. On January 23, the EU announced it would ban member states from importing Iranian oil as of July 1 and freeze the Central Bank of Iran’s assets in the EU. It also barred European firms from transporting and insuring trade in Iranian oil.

MODELING THE MARKET

The European move pulled between 450,000 and 600,000 barrels per day (bpd) off world markets. The new U.S. sanctions added to that, forcing Asian nations and others to wean themselves from Iranian oil.

At the White House, in Brussels, within the French foreign ministry on the Quai d’Orsay, and at Washington think tanks, specialists constructed models of the possible impact. There was a problem: no model could accurately predict how the market would react to the loss of oil or the signal that Iran’s petroleum was now in politicians’ crosshairs.

Some Obama advisers, Ross said, presented analyses saying there would be a major oil price increase, blunting the U.S. economic recovery. Others countered that an Iran risk premium was already “baked into the market” and that global oil demand would stay depressed for some time.

“Between the two conflicting predictions on what was going to happen, it was hard to know,” Ross said.

A joint analysis by Germany, France and Britain distributed to EU members dated December 16, 2011, said the impact of an Iran oil ban was “impossible to fully predict.”

There might be only a short, limited price spike, said the analysis, obtained by Reuters and unreported until now.

But if markets saw the embargo as the first in a series of disruptions, “there could be price rises in the range of $10-20 per barrel for a period of approximately 3 months,” it said. The EU might have to use its own emergency oil stocks to keep prices down.

‘LOOSE TALK OF WAR’

Iran and Israel weren’t helping.

On December 28 last year, Iran’s navy chief, Habibollah Sayyari, threatened to close the strategic Strait of Hormuz, saying “it will be easier than drinking a glass of water.” The Iranians, a U.S. official said, were trying to drive up oil prices to compensate for the loss of exports.

The United States sent a “tough message” to the Iranians that closure of the Strait would not be tolerated, a senior administration official said.

Israeli threats to strike Iran complicated the allies’ strategy further.

On March 4, Obama took the stage at the annual gathering of pro-Israel lobby AIPAC in Washington and delivered a headline-grabbing sentence he had inserted into his prepared remarks. “Already,” he said, “there is too much loose talk of war.” Over the previous few weeks, he said, “such talk has only benefited the Iranian government, by driving up the price of oil.”

Three days earlier, oil prices had peaked at $128.40 per barrel, the highest of his presidency. Republicans were pillorying him for not being tough enough on Iran. The next day, Obama repeated his message in an Oval Office meeting with Israeli Prime Minister Benjamin Netanyahu. “We need to speak to the urgency of dealing with the Iranian nuclear issue without spooking the global energy market in a way that could benefit Iran,” Obama said, according to deputy White House national security adviser Ben Rhodes.

Throughout Spring 2012, the White House and European capitals engaged in a rhetorical campaign to calm markets. More than once, Washington publicly signaled it was ready to tap the U.S. Strategic Petroleum Reserve if necessary.

On March 14, Obama met British Prime Minister David Cameron at the White House and asked for his support if an oil drawdown was needed. That night, Cameron sent word to London ordering emergency release procedures to be readied. News of that step knocked $2 off the price of European benchmark Brent crude, taking it under $123 a barrel.

But high prices persisted. White House officials decided that if Brent crude stayed at or above $120 a barrel for any sustained period, they would have to open the strategic reserve, industry sources said.

On May 19, six weeks before the EU oil embargo took effect, G-8 leaders meeting at Camp David issued a terse, three-sentence statement pledging “to ensure that the market is fully and timely supplied.”

The message to Netanyahu, the signaling on the strategic reserves and the G-8 statement, “all of those things were essentially letting air out of the balloon of oil prices,” Rhodes said.

MIND THE OIL GAP

In January, Obama had set up a special committee to oversee sanctions implementation. The goal was to nudge major producers to pump more oil and Tehran’s major customers, such as China, India, Turkey and Japan, to buy less Iranian crude.

Meeting weekly, the group’s members included deputy national security advisers Denis McDonough and Michael Froman – who specializes in international economics – as well as Brian Deese, a White House official who handles domestic economic policy. Treasury’s Cohen and Carlos Pascual, the State Department’s energy envoy and the point man in talks with oil producers and consumers, were also key players.

Saudi Arabia, which holds most of the world’s excess production capacity, had been signaling for months that it would help fill the crude gap.

Riyadh’s message was, “give us the customers, we’ll produce the oil,” said a source familiar with Saudi thinking.

The Saudis cast their action as supporting global economic growth, sticking to a long-held position that they would never use oil as a weapon, even against arch-rival Iran, officials and diplomats said.

Saudi Oil Minister Ali al-Naimi redoubled his efforts to convince traders he was serious about keeping prices in check. In late March, six influential oil analysts were called to meet a Naimi adviser in London and told to get on message: high prices weren’t justified by market fundamentals.

Riyadh cranked output up to a 30-year high above 10 million bpd in May and kept it high until October. By November, oil prices had dropped $20 a barrel from the March high.

There were other efforts. Opening what may be a new chapter in U.S. energy diplomacy, Pascual and other U.S. diplomats flew to Baghdad and then Basra in November 2011 for a detailed first-hand look at Iraq’s plans to boost oil export capacity.

The Americans, according to officials familiar with the trip, examined the nitty gritty of Iraq’s patchwork oil infrastructure: were pumps ready to move the extra flow? Would old pipelines handle the load or burst? Were plans on schedule for construction of offshore terminals, known as single-point mooring mechanisms, that allow huge tankers to lift oil without docking?

“We came back much more optimistic,” a State Department official said.

Pascual and Energy Department officials also visited Libya, still recovering from its civil war, to review production trends. Its exports rebounded far quicker than expected.

By September 2012, Iraq was pumping 500,000 more barrels per day than a year earlier, and Libya’s daily production had mushroomed from 200,000 barrels to 1.5 million, according to a U.S. Energy Information Administration report.

ENERGY DIPLOMACY

Washington still had to persuade wary allies, and economic competitors such as China, to make the “significant reductions” in Iranian oil purchases that were called for by the new U.S. law or face sanctions.

It was tricky, U.S. officials said: if countries refused en masse, the sanctions would be stillborn.

In one of many meetings with fellow leaders, Obama and Turkish Prime Minister Tayyip Erdogan grappled with Iran in late March at a Nuclear Security Summit in Seoul.

With the Turks, Chinese and others, Obama deployed a powerful argument for sanctions: the alternative might be another Mideast war.

But Turkey was dependent on energy from Iran.

“If you look at the amount of oil and gas they import from Iran, they can’t just turn off the switch. They have an economy to run,” Rhodes said. “So this is something that is going to be phased and incremental for them. And we got that.”

In negotiations, American diplomats avoided demanding specific reductions in imports of Iranian oil, instead asking countries what they could offer.

“We did not in any of these cases actually go in and say that you need to reduce by 15 percent or 18 percent or 20 percent,” a senior State Department official said.

There were talks over alternative oil supplies, and the compatibility of those types of crude with existing refineries – and over price.

One oddity of the discussions was that Washington did not want any capital to reduce imports too quickly – much less stop buying Iranian oil overnight. That would roil markets.

Monthly Iranian crude imports by China and India, Iran’s top two customers, fell by just over 30 percent in the third quarter of 2012 compared with the last quarter of 2011, according to figures from the Bipartisan Policy Center, a Washington think tank. Japan, Iran’s third-largest importer, cut purchases by 56 percent over the same period. South Korea and Turkey reduced theirs by 82 percent and 19 percent respectively.

TALKS, OR WAR?

As the noose tightened, Iran’s rial plunged to an all-time low of 38,000 to the dollar in early October, prompting violent protests around Tehran’s Grand Bazaar.

Sanctions played a part. But Iranian mismanagement was also to blame. Iran’s decision to launch a new currency-exchange center, for instance, spooked many who saw it as a sign Iran was running out of hard currency.

The size of Iran’s foreign reserves, key to its economic resilience, is the subject of guessing games among policymakers and traders.

“Ultimately Iran is running out of cash,” said an Iranian currency trader in Dubai, as he navigated his sports car through traffic in October. The late Ayatollah Ruhollah Khomeini “once said that agreeing to a cease-fire in the Iran-Iraq war was like drinking a cup of poison. Sooner or later,” the trader said, Supreme Leader Ali Khamanei “will have to drink a cup of poison too.”

Many Western officials privately expect a resumption of talks over Iran’s nuclear program in early 2013. They won’t be easy. Iran resolutely defends its right to enrich uranium for what it says are civilian purposes. Iranian citizens, even those unhappy with their leaders, say they support the program.

But the sanctions, deliberately crafted in years past to avoid widespread harm to the Iranian people, are now causing real pain. New Americans sanctions take effect in February, and U.S. lawmakers are preparing yet more measures. The window for diplomacy is narrowing. At the United Nations in September, Netanyahu gave a rough deadline of summer 2013.

“We’ve imposed the toughest sanctions in history,” Obama told reporters the week after his re-election, saying he would again try to open a dialogue with Iran. “I can’t promise that Iran will walk through the door.”

(Arshad Mohammed and Warren Strobel reported from Washington, Justyna Pawlak from Brussels; Additional reporting by Marcus George in Dubai, and Timothy Gardner, Roberta Rampton and Matt Spetalnick in Washington; Edited by Simon Robinson and Richard Mably)

The stepped-up U.S. effort to assist the fractious Syrian opposition comes as Washington turns to like-minded Western and Arab countries to help ratchet up pressure on Syrian President Bashar al-Assad, whose vulnerability was laid bare last week with a deadly bomb attack on his inner circle.

That bold attack, together with rebel offensives in Syria’s two biggest cities and a double-veto of a Syria sanctions resolution at the United Nations, has spurred U.S. officials to intensify contingency planning for Assad’s possible fall from power.

Though aides to U.S. President Barack Obama are not ready to predict how long Assad can stay in power, they are struggling to devise an endgame that would safeguard Syria’s chemical weapons stockpiles and prevent the breakup of the country along sectarian lines.

U.S. officials insist that they have no plans for now to send lethal weapons to Syria’s rebels, a step the White House has publicly ruled out.

But Washington is preparing to provide additional communications equipment and training to help the opposition improve its command-and-control capabilities for coordinating their fighters.

“We want to support them becoming more cohesive, both in terms of their ability to put together a common vision but also their ability to communicate and be in touch with one another,” a senior U.S. official told Reuters.

While Washington remains concerned about the role of Islamist militants in the anti-Assad insurgency, there are also signs that some intelligence on Assad’s troop movements was starting to be fed to rebel groups. Details of such intelligence sharing could not be learned.

“The policy’s moved a little bit,” said one source with knowledge of White House policymaking on Syria, who spoke on condition of anonymity. “We’re not doing anything lethal, but we’re assisting more.”

Bolstering the rebels, comprised of many different factions, and nudging them into a more cohesive force will be a tough challenge.

The rebels have become better organized and more mobile in recent weeks, but Assad’s forces, with superior firepower, have managed to reverse some of the opposition’s gains.

CHEMICAL WEAPONS

Obama on Monday warned Assad that he would be “held accountable by the international community” if his government made the “tragic mistake” of using its chemical weapons.

His comments came after Syria acknowledged it had chemical and biological weapons, saying it would not use them to crush the rebellion but could employ them if foreign countries intervened.

Another hurdle to the revised U.S. policy is the anti-Assad movement itself, which has had little success coalescing politically.

With the impasse at the United Nations due to Russia’s and China’s decision to shield Assad from further sanctions, the Obama administration is turning to the “Friends of Syria” grouping of allied countries to find ways to work with the Syrian opposition to further squeeze Assad’s government.

“That center of gravity shifts to the Friends of Syria effort,” the senior administration official said. “We still think Assad is going to be out of power and we still think there needs to be a plan for what happens next.”

The official said Washington was pressing opposition politicians to devise an “inclusive” transition plan that would prevent the “day-after Assad” from descending into a sectarian civil war.

Some analysts say Syria could end being torn apart into sectarian cantons with Kurds in the north, Assad’s Alawites along the coast, Druze in the southern hills and Sunnis elsewhere. The conflict, they say, could further destabilize Syria’s neighbors, including Lebanon, Iraq, Turkey and Jordan.

(Editing by Cynthia Osterman)

Feltman, who is assistant secretary of state for Near Eastern affairs, is expected to replace Lynn Pascoe, another career U.S. diplomat, as U.N. under-secretary-general for political affairs, a key post at the world body.

In that position, Feltman would help to formulate U.N. policy in negotiations on the Middle East peace process and other conflicts and to oversee U.N. mediation efforts.

It was not clear when Feltman might step down but one source said it could be as early as next week.

Spokesmen for the U.S. State Department and the United Nations declined comment on the matter.

Feltman has extensive experience in the Middle East, having served as U.S. ambassador to Lebanon, as head of the Coalition Provisional Authority’s office in the Irbil province of Iraq and as a senior official at the U.S. consulate general in Jerusalem.

Earlier in his career, the diplomat – who speaks French, Arabic and Hungarian – worked at the U.S. embassies in Israel, Tunisia, Hungary and Haiti.

As assistant secretary of state for Near Eastern affairs, a position he assumed on an acting basis in December 2008, Feltman has covered one of the most strategically important areas of the world during a particularly volatile period.

His tenure included the “Arab Spring” of uprisings that brought down authoritarian rulers in Tunisia, Egypt and Libya as well as the conflict in Syria, where President Bashar al-Assad has sought to crush rebels trying to topple him.

Despite having made Israeli-Palestinian peace a priority, U.S. President Barack Obama has little to show for his efforts more than three years into his term. Direct responsibility for that issue, however, rested first with former special envoy George Mitchell and his successor, David Hale.

It is unclear who may replace Feltman. Secretary of State Hillary Clinton, who has made clear she plans to step down at the end of Obama’s current term after four years in the job, could make an interim appointment and allow her successor to pick a permanent replacement.

(Additional reporting by Louis Charbonneau; Editing by Vicki Allen and Eric Beech)