First test: can Ashton persuade Tehran to compromise? Photograph: European Parliament

As Catherine Ashton starts her new job as the EU's first "foreign minister", she will find Iran at the top of her "to do" pile. In late November, Tehran turned down a proposal from the International Atomic Energy Agency (IAEA) that would have seen a large part of the country's stock of uranium moved abroad for further enrichment. The US, UK, France and Germany seem set to move to tighten UN sanctions on Iran. This could set the scene for a confrontation with Russia and China, which are unconvinced that tough sanctions would work.

It will fall to Ashton to try to get Iran to reconsider. The country's government has not rejected the IAEA proposals outright; it has offered a counter-proposal, which US and European officials deem unacceptable. There is a small hope that the Iranians are open to compromise. Before the UN Security Council imposes further sanctions, the EU needs to be absolutely sure that Tehran does not want a deal.

The trouble is that the chances of a negotiating breakthrough with Iran, which have never been high, have diminished since the fraudulent elections there in June 2009 and their bloody aftermath. For the past five months, the country has been mired in twin crises: one within the regime (a band of clerics versus the former Revolutionary Guard commanders grouped around President Mahmoud Ahmadinejad) and another one between the regime and the people. It is not obvious that in a country as unstable as Iran is today, any centre of power has the courage to push for a compromise with the West. It had been hoped that Barack Obama's entry into the nuclear talks would strengthen the EU's negotiating hand. But even after Obama had offered “dialogue without preconditions”, Tehran decided to reject the recent IAEA package.

The world's attention is shifting towards a tighter sanctions regime, the key critics of which are Russia and China. They are right to argue that sanctions are a very blunt instrument. Tougher sanctions almost certainly would strengthen the Revolutionary Guards' stranglehold on the economy and thus, paradoxically, empower the most authoritarian of Iranian political forces. Sanctions could also prompt Iran to kick out the IAEA inspectors who monitor Iran's nuclear facilities; this would leave the world blind to Tehran's nuclear intentions. But the case for sanctions, on balance, seems somewhat stronger. They discourage other states in the region from following Iran down the nuclear path, and they give the US and – crucially – Israel an alternative to the use of force. Existing sanctions have worked to the extent that they have deprived Iran of some needed technology: the centrifuges used to enrich uranium are said to be crashing frequently.

Sanctions are not meant to replace talks but to complement them; so Catherine Ashton, like Javier Solana before her, will be expected to maintain dialogue with Tehran while the UN debates sanctions, and after the Security Council agrees a new regime. But one wonders if this is the EU's last hurrah on Iran. If the combination of sanctions and talks fails, and if Israel strikes Iran's nuclear facilities, Tehran will certainly call off the EU-led talks. The other choice before the world is to start working on containing a nuclear Iran, by making its neighbours feel secure (so as to discourage them from building nuclear weapons themselves). But this will almost certainly be a job mainly for the US, rather than the EU. So while Baroness Ashton will spend a lot of time on Iran at the beginning of her term, the EU may gradually lose its leading role.