For several months now, it had been looking like Iran had the upper hand in international politics. There seemed to be little slowing of its burgeoning nuclear program, the West, and especially the European countries, lacked any bargaining power, and Iran is clearly benefiting from the chaos in Iraq. However, in the last few days, Iran's fortunes have taken a drastic turn for the worse. First, Iran's primary patron, Russia, has turned on it, and is now supporting the extension and toughening of international sanctions. Second, Iran seems to have made a huge miscalculation by seizing 15 British sailors in the Shatt al-Arab waterway. Iran claims the sailors had strayed into Iranian territorial waters; Britain and Iraq claimed the ship was in Iraqi waters performing a routine and legal search of a ship bound for Iraq. The timing of the seizure, occurring right before the vote in the UN Security Council on the sanctions seems to have been a bad attempt to threaten the UNSC into backing away from the use of sanctions. However, Iran seems to have acknowledged its mistake, and is currently interrogating the sailors in what is interpreted to be an effort to release them in a face-saving gesture by determining that the violation of Iranian waters was unintentional.
So, what's going on with Iran? Why the sudden reversal of fortune? The most important component here is the loss of Russian support. While it's not entirely clear why Russia would turn on Iran, I strongly believe that US plans to build an anti-ballistic missile system in Eastern Europe has demonstrated to Russia, and President Putin in particular, that Russia is no longer the power that was the USSR, and that the US will no longer acknowledge Russian interests without some kind of quid pro quo. That is, if Russia wants the US to back away from building the missile defense system, it can't just rattle its sabers. Rather, it must cooperate with the US and the West, producing some kind of material benefit that it can then use as political capital to get what it wants. Don't be surprised if, in the aftermath of the imposition of sanctions, Russia tries to re-open a conversation about the ABM system.
Such an outcome would be a big victory for the larger policy of engagement, in which the US backs away from pressuring countries to make political reforms in favor of economic liberalization. This is the same policy that the US has long applied to China. If the country becomes connected to the larger Western and international economy, it may not be willing to risk those connections to support rogue patrons like Iran, North Korea, or Sudan. Recently, we have seen China become more willing to pressure its patrons, and now Russian pressure on Iran seems to fit the bill as well. The US needs to keep the pressure on, convincing these states that their future economic success, as well as their political status in the international community, depends on them reining in their clients and playing by the rules of the system.