Since the fall of Iraqi dictator Saddam Hussein in April, the United States has been honing in on the regime of President Bashar al-Assad, putting pressure on Syria to fall into line with the new regional order created by the war in Iraq and the presence of some 135,000 US troops in Syria's eastern neighbour.

Even by Washington's admission, Damascus has cooperated in the US-led war on terror by helping to hunt down members of Osama bin Laden's Al-Qaeda network.

And Damascus was praised last month by Britain -- the United States' staunchest ally in the war on terror -- when it extradited to Turkey suspects in a series of attacks in Istanbul in which 67 people died.

But the US still accuses Syria of backing anti-Israeli militant groups, notably the Lebanon-based Hezbollah and Palestinian movements Hamas and Islamic Jihad, and last week threatened Damascus with sanctions.

On December 12, US President George Bush signed a law providing for economic and diplomatic sanctions to punish Syria for what the United States said were its ties to terrorists, tacit support for anti-US insurgents in Iraq and efforts to obtain weapons of mass destruction.

It also calls on the governments of Lebanon and Syria to "enter into serious unconditional bilateral negotiations" with Israel to secure "a full and permanent peace."

Bush will decide if and when the sanctions are to be applied.

Washington has accused Damascus of turning a blind eye to anti-US fighters who cross into Iraq via the porous, 600-kilometre (360-mile) border separating the two neighbours.

But the Western diplomat in Damascus wondered out loud if Washington's real gripe with Syria wasn't over its alleged development of weapons of mass destruction.

The US has accused Damascus of having chemical weapons and trying to obtain biological weapons.

"It all depends on how significant the Americans perceive that problem to be," the diplomat said.

In Arab diplomatic circles, the general feeling is that Damascus wants to resolve its differences with Washington through dialogue, while taking care to "safeguard its national integrity and not appear to be kowtowing to Washington."

On an official visit to Athens last week, Assad said he was optimistic that friction with Washington over the sanctions would not last.

"This concerns (the US) Congress... There must be a dialogue. We are optimistic and dialogue with the US never stopped," he said.

Early this month, the New York Times quoted Assad as saying that he wanted to resume negotiations with Israel on the Golan Heights, occupied by Israel since 1967.

If those talks come about and the two sides reach agreement, they could herald the normalisation of relations between Syria and Israel, the New York Times quoted Assad as saying.

"The term 'normalisation' sets no limits: it means relations equivalent to those which exist between Syria and the United States," the Syrian president was reported as saying.

Arab diplomats point out that the US also appears to be in favour of going down the diplomatic route, having appointed Margaret Scobey as Washington's new ambassador in Damascus "at the same time" as Bush was ratifying the sanctions against Syria.

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