"Iran's main intents lie in two efforts: one is asymmetric warfare, and the other is weapons of mass destruction," said Anthony Cordesman, strategic analyst at the Center for Strategic and International Studies, a public policy think tank in Washington.

Cordesman, author of "Iran's Developing Military Capabilities," a CSIS-sponsored report assessing Iran's armed forces, and a former high-ranking Pentagon official, also noted that in light of uncertainties about Iran's nuclear capabilities, a military strike on the Islamic republic would be "disastrous" and so a diplomatic approach is the way to go, even if that might not entirely stop Iran from pursuing a military alternative, he said.

Although the United States publicly says it prefers to deal with Iran through diplomacy for now, Vice President Dick Cheney, in a television interview earlier this year, did not rule out the possibility that Israel might hit Iran's nuclear facilities.

Cordesman's remarks come just days before foreign ministers from France, Britain and Germany -- the so-called European Union 3 -- will meet Iranian officials to negotiate a permanent halt to Iran's already-suspended uranium enrichment program. The step is a key part of both civilian and military nuclear programs.

Iran says its nuclear program is for peaceful purposes, the United States and much of the international community believe otherwise. Cordesman agreed.

"Much of the nuclear tests and development efforts in Iran simply make no sense as peaceful research," he said. "I'm almost certain there is a nuclear weapons program now."

Iran's expensive long-range missile program wouldn't be financially feasible "unless you put a nuclear warhead on it," he said.

Speculation about Iran's nuclear capabilities often stretches far from reality, Cordesman said. When observing international intelligence, Iran still is "a significant distance from a meaningful missile and a nuclear capability," he added.

In light of a lack of a credible threat, diplomacy is probably the best way to go, he added.

"If the Europeans' negotiations do nothing more than keep Iran from being overt in deploying and testing, they have accomplished a great deal," Cordesman said.

So far, financial incentives for Iran to give up its uranium enrichment program are lacking, he said.

"Iran desperately needs industrial development, it needs job creation, and it desperately needs to improve technology for its natural gas and oil industry."

The United States supports the European efforts to negotiate with Tehran but has in the past unsuccessfully tried to get the matter referred to the U.N. Security Council. This time around, however, it has said it will block its opposition to Iran's entry into the World Trade Organization and to the sale of airline parts for the Islamic republic's ageing civilian fleet.

The question remains, however, whether Iran is ready to accept financial incentives on a political level, Cordesman said. If diplomacy fails, the U.N. Security Council has to step in and use "a very decisive political language combined with economic sanctions on things like transportation and shipping that would have significant economic pressure over time," he added.

Although China - a permanent, veto-wielding member of the Security Council -- has signaled it will veto drastic sanctions against Iran in absence of a direct threat, the situation might radically change if U.S. intelligence "would find a smoking gun," Cordesman said. So far, there is no clear evidence Iran is pursuing a nuclear weapons program.

That's why the U.S. administration should continue to push for intelligence-gathering in Iran, no matter how intrusive that might be, Cordesman said.

"If it bothers the Iranians, so be it," he said. "It's a matter of life. It's too important."

Asymmetric warfare -- featuring highly mobile guerilla troops and hit-and-run attacks -- is thought to be the most effective way to attack a superior military power such as the United States. Iran has about 120,000 people in the revolutionary guards, a force that could deploy asymmetrical warfare in the Middle East, Cordesman said.

"These are pretty capable forces," Cordesman said. "They could very quickly move large numbers of people to a country like Bahrain."

But while Iran's nuclear enrichment programs and its capabilities for asymmetric warfare pose a threat to stability in the Middle East, its conventional military systems in army, navy and air force are "obsolescent," Cordesman said.

In the light of slow modernization of planes, tanks and missile system, which are mostly from the mid-1970s, Iran's capability of a conventional military strike is severely limited, Cordesman said.

"They have a 340,000-men army, but 220,000 of them are 18-months-conscripts," Cordesman said. "Its artillery is old and worn ... and its 1,600 tanks and about 300 airplanes are outdated even by Middle Eastern standards."

Wayne White, a Middle East expert at the Middle East Institute, said Friday in a telephone interview there are incentives for Iran to pursue independent weapon systems.

"Most of Iran's conventional weapons were taken away by Iraq in the last stages of the Iran-Iraq war," he said. "Renewing basic military forces is extremely expensive -- we're talking billions of dollars."