The right to develop nuclear energy

MARGARET WARNER: As she washes her son's grave nearby, Masoomeh Sepassi also seems untroubled by the mounting tension.

MASOOMEH SEPASSI, Iranian Citizen (through translator): Our government is trying to prevent a war, but they can't prevent the Americans from starting one. If that happens, God is behind us and will support us.

MARGARET WARNER: With more than 70 percent of the population under 32, there are millions more young Iranian men like the son she lost.

MASOOMEH SEPASSI (through translator): They are all soldiers. If there is a war, they are all ready. You see him, wearing that uniform? He wears that because he likes that.

MARGARET WARNER: We heard similar words of resolve in the maze of alleys and stalls of Tehran's main bazaar.

Economic sanctions would hurt appliance dealer Mohammad Heddayati's business, because he would have to buy his European brands from middlemen. But he says Iran is entitled to develop its own nuclear technology, and should not back down.

MOHAMMAD HEDDAYATI, Market Trader (through translator): War has a high cost for all countries, and I think Iranians are not after war, contrary to the image of us that is portrayed around the world. We are reasonable and calm people, as long as we are not bullied. But, when we are forced to do something, we will do anything to stand up against that, even if we don't have the resources.

MARGARET WARNER: In his first year in office, Iranian President Mahmoud Ahmadinejad has tapped that sense of national pride on the nuclear issue.

MOHAMMAD ATRIANFAR, Publisher, Shargh Newspaper (through translator): People have been hearing these things about having the right to have or to possess this capability. And, naturally, if you ask an Iranian whether you want this right or not, they would say they do want it. But if you ask, though, "What is nuclear energy?" they might not be able to tell you what it is.

MARGARET WARNER: Mohammad Atrianfar is publisher of Tehran's leading reformist newspaper, Shargh. Though he's critical of the government on many issues, even he has some sympathy for the official position on the nuclear one. He doesn't even discount the prospect of Iran having a nuclear weapon one day, something the Iranian government denies pursuing.

MOHAMMAD ATRIANFAR (through translator): As an Iranian, regardless of my political position, as the citizen of Iran, if the capability of my country reaches a level that we can have the usage of nuclear energy, whether it's for energy or a weapon, I feel right to answer the question, what's the difference between me and a typical Frenchman or a Pakistani man? Why should they have that capability, and why not us?

Iran and the rest of the world

MARGARET WARNER: But Iran also has to get along in the world, he says, and President Ahmadinejad is making that exceedingly difficult with his hostile rhetoric against Israel, the United States, and the United Nations.

MOHAMMAD ATRIANFAR (through translator): The biggest problem that the U.S. has is that it cannot trust the current government of Iran.

MARGARET WARNER: Why?

MOHAMMAD ATRIANFAR (through translator): Because of radical slogans, the anti-West, anti-Zionist, anti-Israeli slogans, and the issues of Lebanon, and so on, so forth. This does not reflect the general public opinion. I don't think the nation agrees with these harsh, extreme slogans.

MARGARET WARNER: Atrianfar is reflecting the views of a sizable part of the younger generation, which was not shaped by the ideological fervor of the 1979 revolution, nor the eight-year Iran-Iraq War that followed.

But power rests firmly in the hands of conservative Islamic clerics and middle-aged revolutionaries, like Hossein Shariatmadari. He's the editor of the hard-line newspaper Kayhan, named to the job by Supreme Leader Ayatollah Khamenei, the highest authority under Iran's system of clerical rule.

He says, the U.S. precondition that Iran freeze uranium enrichment before talks is a non-starter.

HOSSEIN SHARIATMADARI, Editor, Kayhan Newspaper (through translator): The precondition imposed mean that, already, beforehand, the result of the negotiation has been announced. We are not going to give in to the bullying, because, if we were going to give in to that kind of bullying, we would not have started our revolution. From the very beginning of the revolution, we have been confronting the United States.

MARGARET WARNER: He disputes Washington's argument that Iran forfeited its right to a peaceful nuclear program under the Nuclear Non-Proliferation Treaty, because it deceived the International Atomic Energy Agency for 20 years.

Are you denying that the -- that Iran ever lied to the IAEA?

Economic sanctions

MARGARET WARNER: That bravado is not universal. Some here are well aware of the risk of economic sanctions or U.S. military action.

Iran has a lot to lose in either case. Iran is no Afghanistan. Its booming oil revenues support a wealthy lifestyle for some and a middle-class existence for many others. Longstanding U.S. sanctions have generated strong economic links to Europe Europe, Asia and the Gulf.

But tensions over Iran's nuclear program are already hurting carpet dealer Mehrdad Ghazvinian's business. He didn't sell one carpet during the entire month of August.

MEHRDAD GHAZVINIAN, Carpet Dealer: They talk about destroying -- you know, they want to destroy Israel. You know, they want -- this is -- this kind of thing, people, they heard a lot in other country, and people are worried about this. So, why they come to Iran? They go to Turkey. They go to another country, not here. A lot of country, they can go there. They spend their money there.

MARGARET WARNER: Higher-end businessmen are also feeling the pinch. Bijan Khajehpour heads a consulting firm that advises foreign companies investing in Iran.

BIJAN KHAJEHPOUR, Business Consultant: There are some investors who are very wary about political risk, about issues such as potential sanctions in the future, and those -- that category is definitely not very engaged in Iran.

MARGARET WARNER: We caught up with Khajehpour at a Tehran conference of Iranians and Europeans, sponsored by multinational giants like Shell Oil and Total. The topic was Iran and the global community. But the nuclear standoff dominated. As the discussion grew heated, Deputy Foreign Minister Reza Sheik Attar played the oil card.

ALI-REZA SHEIKH ATTAR, Iranian Deputy Foreign Minister (through translator): Iran is not a country that you can sanction without there being side effects. All the northern coastal areas, the southern coastal areas, the Straits of Hormuz, are under Iranian control. And the recent military maneuvers have shown that Iran has a great degree of flexibility of movement.

MARGARET WARNER: That threat brought a sharp retort from Rosemary Hollis, research director of the British think tank Chatham House. It was blunter than is customarily heard in political circles in Tehran.

ROSEMARY HOLLIS, Research Director, Chatham House: I think, if Iran wants a confrontation, there is one to be had. I would not be as relaxed as some of you gentlemen that there's no possibility of an attack on Iran. I think, if you really want one, you will get one.

MARGARET WARNER: Instead of trying to out-threaten Washington, she said, Iran should concentrate on convincing the world that its nuclear program is peaceful.

Some well-placed Tehranis told us that they think the Iranian government is becoming way too cocky in its approach to the nuclear issue. It's the kind of overblown confidence, they said, that could lead to a dangerous miscalculation.

That confidence was on display at President Ahmadinejad's press conference last week, when he challenged President Bush to a debate, and dismissed the threat of sanctions.