Nuclear talks between the P5 +1 – permanent Security Council members China, Russia, France, Britain and the US, plus Germany – and Iran begin today in Baghdad. This comes on the heels of an imminent announcement between Iran and the International Atomic Energy Agency, based on talks from recent days in Tehran. So the diplomacy engine has revved up significantly.

The negotiations will center on uranium enrichment:

The main goal of the six powers – known as the P5+1, for the five permanent UN security council members plus Germany – is expected to be an Iranian agreement to shut down higher-grade uranium enrichment, which it launched in 2010 and has since expanded in an underground plant at Fordow. Much to Israeli alarm, the plant would be largely impervious to attack from the air.

Producing such highly enriched material in larger quantities has shortened the time Iran would need to build an atomic bomb.

Iran says its nuclear programme is a peaceful bid to generate electricity and has repeatedly ruled out suspending all its enrichment of uranium, an activity that can have both civil and military purposes.

But it has indicated possible flexibility on the higher-grade enrichment of uranium to a fissile concentration of 20%, the part of Iran’s work that most worries the west.

In addition to the restriction on uranium enrichment, the P5+1 are also likely to offer an oil carrot, a way for Iran to sell oil to Asia outside of sanctions on their petroleum industry. In exchange for guarantees that Iran’s nuclear program will not become a weapons program, the EU would suspend its ban on shipping insurance, which has disrupted the ability for Iran to ship crude oil to countries like China, India, Japan and South Korea.

This is actually not much of a concession. First, the insurance ban doesn’t take effect until July 1. Second, those countries, desirous of Iranian oil, were already considering offering their own shipping insurance to their particular refiners. The flow of oil to Asia was not likely to be disrupted. However, this is a significant shift rhetorically, where the Western powers give up on sealing off Iran’s oil market. And it sets the stage for the broader negotiation – changes in the sanctions on oil and banking in Iran, for guarantees on uranium enrichment.

The P5+1 also wants “confidence building measures” out of Iran, such as freezes in certain production of highly enriched uranium. Iran sort of pre-empted this with their announcement on new inspections by the IAEA, which is perhaps the most confidence-building measure they could provide. The US reacted warily to the IAEA agreement, recognizing that it changes the dynamic in Baghdad.

Overall, however, there are more hopeful signs on a negotiated solution to the Iranian situation than we’ve seen in quite a while, which would lower tensions significantly and reduce the prospects of war. Don’t tell that to the US Senate, which passed sanctions on their own just yesterday. But a successful diplomatic resolution would remove one of the headwinds to the economy in the next year or so. Now if we can just solve Europe.