A change in Iran's top nuclear negotiator indicates President Mahmoud Ahmadinejad and those who oppose any compromise in an atomic standoff with the West are winning the policy argument in the Islamic Republic.

Saeed Jalili, a close ally of Ahmadinejad, has replaced Ali Larijani, who had been backing a more pragmatic line in talks aimed at allaying the West's suspicions that Iran is seeking to build atomic bombs, a charge Tehran denies.

It is the latest in a series of changes in top posts that have included reshuffles at the central bank and Oil Ministry, strengthening Ahmadinejad's power base ahead of the parliamentary election in March and presidential polls in 2009.

The president's maneuverings do not, however, give him a free hand to draw up policy in Iran's system of clerical rule, which gives Supreme Leader Ayatollah Ali Khamenei the last word in all matters of state, including nuclear policy.

But Khamenei would have approved Jalili's appointment, Iranian analysts say, signaling he backs Ahmadinejad's line that compromise with the West in the past has failed and that the United States is too bogged down in Iraq and Afghanistan to open a new military front against Iran.

Although Washington insists it wants diplomacy to end the row, it has refused to rule out military action if that fails.

"There are two analyses (in Iran) about the future of the nuclear crisis. One analysis focuses on gaining advantages through negotiations," said Tehran University professor Hamidreza Jalaiepour.

"The other analysis is that the Western countries do not have enough power to prevent Iran progressing, so they are not afraid of anything. This analysis has the greater voice. Ahmadinejad believes this," he added.

BEHIND CLOSED DOORS

While Ahmadinejad's view was prevailing, Jalaiepour said it did not mean the president had taken control of atomic policy.

"I still do not believe Ahmadinejad is handling the nuclear file (on his own). It is up to the leader, who believes we should stand up against Western leaders. When (Khamenei) decides to change his policy, everything will change," he said.

Analysts say that policy debate in Iran, handled by a select few in closed doors, has focused on tactics for negotiations and not on whether to give up Iran's atomic plans.

Even Larijani, who had softened his line after two years in office, was adamant Iran would not give up its bid to make nuclear fuel although he argued for diplomacy and engagement to ease Western pressure, analysts said.

Ahmadinejad earlier this month accused those who "want to negotiate" of playing into the hands of Iran's enemies.

While he may not hold all the reins of power as president, Ahmadinejad has been broadening his influence in policy making.

Jalili's appointment as secretary of the Supreme National Security Council, by tradition the top nuclear negotiator, is the latest reshuffle of a senior post to remove those who were not the president's 'yes' men.

The central bank governor was replaced in August, which analysts said followed a dispute over monetary policy.

The oil minister, overseeing the energy industry of the world's fourth largest crude producer, was sacked after disagreeing with Ahmadinejad over management changes, industry insiders said.

And a planning organization that was full of technocrats who allocated budgets nationwide has been scrapped. Its activities are now under direct control of the office of the president.

"He is very astutely and gradually creating these changes to bring in his own people at all levels of government and making it much more difficult for any political rival to compete with him in the next (presidential) election," said one Iranian analyst.

"Obviously, it is an indication that he is gaining more influence," added the analyst, who asked not to be named.

PERFECT EXCUSE

Such maneuverings could backfire. If the economy, now enjoying windfall oil earnings, starts to falter and inflation, already running above 17 percent, gains more momentum, Ahmadinejad and his allies will have few others to blame.

But analysts say his position of defiance in the face of Western pressure over Iran's nuclear program could provide the perfect excuse for troubles ahead if the West escalates the dispute with more sanctions -- or even military action.

"Any international pressure on Ahmadinejad will stabilize his situation. Military attacks will push us to support him," said a former official with connections to Khamenei who is critical of the president.

Washington has shown no readiness to compromise on its demand that Iran halt uranium enrichment, the process that can make fuel for power plants or, if Iran wanted, bomb material.

U.S. President George W. Bush warned last week that a nuclear-armed Iran could trigger World War Three.

"Iran's nuclear case is getting into a dangerous phase," said political commentator Mashallah Shamsolvaiezin. "The existence of two hardline positions, one in the White House and one in Iran's presidential office, might lead to a face-off."

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