* Iran seen ready to compromise to help end Syria war
* Tehran won't give up strategic ties to Damascus
* West also seen leaning more towards compromise
By Babak Dehghanpisheh
BEIRUT Jan 8 (Reuters) - For weeks, American officials have lobbied to exclude Iran from the Geneva talks on the Syrian conflict in late January, pointing to Tehran's military and financial aid to the government of Syrian president Bashar al-Assad.
But last Sunday, Secretary of State John Kerry did an about-face: Iran could take part in the conference on the sidelines, he said, a move that could bolster the importance of the talks.
Kerry's statement was dismissed by an Iranian foreign ministry spokeswoman who said that Iran "will not accept any proposal that does not respect its dignity."
Still, the comments could present an opening for Iranian officials who have long wanted the international community to acknowledge their role as a key regional power and have indicated that there will be no resolution to the conflict in Syria without their participation.
Most importantly, they may now be willing to make some unprecedented compromises in negotiations to end the conflict, including removing Assad from power, diplomats and analysts say.
"I don't think it's a red line for them," said a diplomat who recently met with senior Iranian officials.
"They would be ready to see some alternative to Mr. Assad provided that alternative is credible and does not generate chaos," said the diplomat, who asked that he not be identified because of the sensitivity of his discussions.
Since the conflict broke out in 2011, Iran has firmly backed Assad with weapons, shipments of oil and military advisers. As the Syrian civil war took on an increasingly sectarian character, Shi'ite Iran has seen Assad as a bulwark against the spread of hostile Sunni Muslim militancy across the Arab world. Assad is a member of the Alawite minority sect, an offshoot of Shi'ism.
Nevertheless, there has been a price to pay for Iran in losing support in Arab countries where Sunnis are the majority, and in the rise of sectarian hostility in Syria's volatile neighbours like Lebanon and Iraq.
The new suggestions that Iran might consider loosening its support for Assad come after a year in which the Syrian leader markedly improved his position both on the battlefield and in the diplomatic arena, with firm Iranian help.
A year ago rebels were steadily advancing on Damascus and many Western countries were openly proclaiming that Assad's days were numbered. But since then Syrian government forces have won battlefield victories with the support of thousands of fighters from Iran's allies, Lebanon's Hezbollah Shi'ite militia.
If Iran is now open to a compromise on Syria, it is likely to find the West far more receptive than before. Western countries that once demanded Assad be removed as a pre-condition to any settlement are showing reservations about their support for his foes as al Qaeda-linked fighters have seized control of rebel-held areas.
In September, U.S. President Barack Obama called off missile strikes to punish Damascus for using chemical weapons, ending more than two years of speculation that the West might join the war against Assad as it did against Libya's Muammar Gaddafi.
Iran's own relationship with the West has also been transformed with the election of President Hassan Rouhani, a relative moderate. Secret negotiations with the United States culminated in an historic deal in November to ease some sanctions on Iran in return for curbs to its nuclear programme.
However, even if they were to accept the removal of Assad it is unlikely that Iranian leaders would agree to a successor government hostile to Tehran or one that would threaten their logistical pipeline through Syria to Lebanon's Hezbollah.
"The person of Bashar Assad is expendable for Iran," Karim Sadjadpour, an Iran analyst at the Carnegie Endowment for International Peace, wrote in an email. "The question is whether Iran believes it can preserve its strategic interests in Syria and the Middle East if the Assad regime were to collapse."
Despite Iran's steadfast support of Assad, there have been occasional signs that it was keeping its options open: last February, then foreign minister Ali Akbar Salehi met with Moaz Khatib, the head of the opposition Syrian National Coalition at the time, on the sidelines of a security conference in Munich.
There have also been signs that support for Assad was divisive among senior Iranian government officials.
In late August, Ali Akbar Hashemi Rafsanjani, a veteran politician who heads the Expediency Council advisory body, was quoted as blaming the Assad government for a chemical attack in Damascus which killed hundreds of people and nearly led to U.S. armed intervention.
"From one side the people are chemically bombed by their own government and from another side they wait for the bombs of America," Rafsanjani said in an audio clip leaked on the internet which was quoted by a semi-official news agency. The news agency later changed the comments and Rafsanjani claimed he had been misquoted.
Iranian officials are also taking stock of the high price the country is paying for its involvement in the Syria conflict which has inflamed sectarian divisions across the region.
In late November, the Iranian embassy in Beirut was hit by a double suicide bombing which killed at least 23 people. Among the dead was the cultural attaché at the embassy. The group that claimed responsibility was the Abdullah Azzam Brigades, a militant group which supports hardline Sunni rebels in Syria.
And in Iraq, a Shi'ite-led government with close ties to Tehran is facing one of its strongest challenges yet as Sunni militant fighters allied with Syria's rebels have taken control of the cities of Fallujah and Ramadi. The attacks sufficiently alarmed Iranian officials that a top military official offered to send military aid to the Iraqi government on Monday.
"What has changed is that the Iranians for the time being have so many strategic and security problems on their hands," said Walter Posch, an Iran expert at the German Institute for International and Security Affairs.
"Any security apparatus would be stretched with these problems. So you concentrate on these regional problems and come out as unscathed as possible and try to weather the storm."
On a visit to Tehran last month, European Parliamentarian Marietje Schaake heard Iranian parliamentarians and other officials express support for a political resolution to the Syrian conflict.
NO BACKING AWAY FROM INTERESTS
"There is a general sense of openness to being a part of the Geneva talks but without preconditions. And that the future of Syria should be left up to the Syrian people," said Schaake.
Still, even if Assad goes, the Iranian government will not back away from their interests in Syria, particularly if it means ties to Hezbollah are threatened. One hardline Iranian lawmaker Schaake spoke to praised Hezbollah and said the militant group should be given a prize for its work.
"So these discussions weren't always at the solution-oriented level that we might wish to see," Schaake added.
The head of the Islamic Revolutionary Guards Corps, Mohammad Ali Jafari, made clear last month how important Syria remains to Iran: "We will take whatever action we can and is necessary to protect Syria and we will do this with pride," he said, according to the Tabnak news site.
There are indications that Iran is already preparing for a post-Assad scenario: for months Iran has been training and organising local militias in Syria modelled after the Basij militia in Iran. These militias have been set up to support the Syrian government but if a government hostile to Iran's interests follows Assad they could be used to fight it.
"They train these militias as a backup," said Posch.
When the United Nations announced the list of participants for the conference last Monday, Iran was not on the list of countries invited in the first round. Whether Iran is ultimately invited or chooses to participate on the sidelines, the conference will be only the beginning.
"The real work will not take place on the 22nd of January," the diplomat said. "This is to kick some political momentum into a process. The real work will begin after the 22nd of January if they get to that stage." (Reporting by Babak Dehghanpisheh; Editing by Peter Graff)