From today's New York Times:

President Bush and the Chinese government both declared their full support on Thursday for a Russian proposal to allow Iran to operate civilian nuclear facilities as long as Russia and international nuclear inspectors are in full control of the fuel.

Mr. Bush's explicit public endorsement puts all of the major powers on record supporting the proposal, even as most acknowledge that it is a significant concession to Iran and runs the risk that the country will drag out the negotiations while continuing to produce nuclear material. Yet officials say they believe it is the best face-saving strategy to pursue a negotiated settlement with Iran.

European and American officials familiar with the details of the offer that Russia made to Iran say that Iran would continue to be allowed to operate its nuclear plant at Isfahan, which converts raw uranium into a form that is ready to be enriched. That is a step that both Europe and the United States said last year that they could not allow — and that was explicitly barred under the agreement between Iran and Europe in late 2004, because Iran could divert the uranium to secret enrichment facilities. Iran began operating the Isfahan plant again in August....

Critics of that concession say that it could send a signal to Iran that it no longer has to comply with all provisions of its November 2004 agreement with Europe.

"A red line was crossed" when Iran began producing the uranium last fall, said David Albright, president of the Institute for Science and International Security, a nonpartisan research group that follows developments in Iran. "The Iranians got away with reopening the conversion facility, and now people have accepted it's never going to be shut again and have taken it off the table."

...While China favored the Russian proposal, it also firmly opposed the use of sanctions. That comes as a disappointment to Washington, which this week sent a top official to persuade China's leaders that they should do far more....

The Bush administration has not allowed its stated opposition to Iran's uranium conversion at Isfahan to block the Russian offer. "This is dangerous, but it is minimally acceptable as long as they are not enriching," said Mark Fitzpatrick, a senior fellow at the International Institute for Strategic Studies in London. "The Russian proposal is the last best chance of resolving this without an escalation."