President Assad is caught between America's peaceful overtures and the bellicose language of Israel's new leader. Donald Macintyre reports from Damascus .
Perfumier Mohammed Kheir Sheikh Salem sat at the counter of his shop, the shelves neatly laden with glass bottles of scent from seemingly every flower in the Middle East, the television in the corner showing Al Jazeera with the sound turned down in deference to his visitors.
Moments after Avigdor Lieberman, Israel's abrasive new Foreign Minister, appeared briefly on the silent screen, Mr Salem pondered a question about whether Syria might yet make peace with its southern neighbour, winning back the Golan Heights 42 years after it was seized in the Six Day War. "We had hoped so," he said with a sigh. "But with Netanyahu it's very difficult."
Mr Salem's sober, and in international terms fairly conventional, response to this week's formation of Israel's new government goes to the heart of one of several challenges facing Syria and its autocratic President, Bashar al-Assad, as they contemplate the suddenly quickening Western interest in whether Syria can finally, after years of isolation as a pariah state, be brought in from the cold.
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As the US, who sent a high-level State Department delegation here last month, considers whether to restore the diplomatic relations it broke off in 2005 because of its lively suspicion that Damascus was behind the assassination of the Lebanese Prime Minister Rafik Hariri, apolitical businessmen like Mr Salem are wondering if Syria's isolation could be nearing its end.
"We are very optimistic," he says of the new US President, Barack Obama. "But we are still waiting for actions."
One of those "actions" in the eyes of President Assad would be US brokerage of the negotiations which started indirectly with the just-departed Israeli government of Ehud Olmert, negotiations which the Bush administration regarded with something between indifference and outright hostility.
President Assad has indicated, most recently in interviews with Seymour Hersh, published in the current New Yorker, that he wants to turn these into direct talks with Israel's new government. The condition is that the US plays, as he put it to Mr Hersh, "a prominent and active part in the peace process", one which should include a direct meeting between himself and the new man in the White House.
For the US - and perhaps Israel too - the prize would be gradually to detach from Iran its most steadfast ally in the Middle East.
Mr Salem, whose family business was started in 1910 and who still keeps as a memorial to his grandfather the grey metal vat he used to make perfume, is unusual among shopkeepers here in a traditionally middle class district of Damascus in his willingness to talk politics.
Living in the shadow of one of the most entrenched secret police forces in the world, not to mention the handy reminder of the omni-present face of the President himself in the city's streets on advertising hoardings, most preferred this week to avoid the subject.
But then Mr Salem's own hopes of Mr Obama are largely economic.He has personally felt the impact of Syria's isolation on the business, only one of three traditional perfume producers left in a Syrian industry which began in Roman times and has long exported the natural flower oils that it extracts for French producers to finish as a perfume suited to European tastes.
But then "Bush closed things down" when a year before the Hariri assassination he imposed sanctions in protest against the flow of arms and personnel to the insurgency across the border in Iraq, its sponsorship of Hamas, Islamic Jihad and Hizbollah and its interventions in Lebanon.
This hit not only Mr Salem's exports but his chances of importing modern equipment to update his traditional, high-quality production, from countries pressured by the US not to sell to Syria . "Obama could ease those pressures," he said. "If relations will improve, the economy will improve too."
A few doors down, Hassan Asseh was manning his family's small grocery business. But Mr Asseh, 21, a Damascus University economics graduate, has many of the sharp old Syrian trading instincts which a regime characterised for much of its life by rigid statism has been unable to suppress.
"At the moment I am getting experience by working here and helping my family," he said. But in time he wants to build the business into something "more modern and more complicated": import-export and distribution.
Mr Asseh also talks thoughtfully about the pros and cons of a system which he describes as "socialist": "Let's say its more fair to the poor. But you need a balance." Because the government has long paid out huge subsidies to lower the price of fuel and other basic goods, he said, "it has less money to provide good services. When governments have more money they can provide better quality services."
Impatience for faster economic reform seems common among the younger, educated, entrepreneurial generation. One corporate lawyer last week welcomed the regime's moves to liberalise the banking and insurance sectors and to encourage inward investment, mainly from the Gulf. But he was privately scathing about the problems of establishing a firm legal environment in which companies could operate. While insisting he could put his views freely to relevant reform committees, he complained that regime-appointed judges were too often corrupt.
Meanwhile, despite his relative frankness on economics, Mr Asseh was uneasy when the conversation turned to a possible rapprochement with the US, torn between his natural politeness to a stranger and his desire to avoid controversy. "We are moving into politics," he said with a smile. "One question on politics and that's it." So did he think peace with Israel was possible? The answer was diplomatic. "In general if two parties in a dispute have the will to reach agreement, they will find a way."
Whether a new right wing-led Israel has the will to pursue a deal which would involve handing back the Golan is an open question. But the issue of Israeli-Syrian peace is not the only one for the West. Britain, setting considerable store by what a Syrian re-orientation could do for wider progress in the Middle East, has been in the forefront of trying to encourage one, which is why the Foreign Office minister Bill Rammell was in Damascus this week. During a relatively low key but sure-footed and well-briefed series of meetings, including with the Syrian Foreign Minister Walid al-Muallem, Mr Rammell welcomed the indirect talks with Israel, Syria's withdrawal from - and supposedly more orderly relationship with - Lebanon and the indications reinforced by Mr al-Muallem's visit to Baghdad last week that Syria is ready to be more constructive towards the Iraqi government.
But while the UK's standing in Damascus may have been improved by its decision to explore contacts with Hizbollah MPs in Lebanon, Mr Rammell was also, by all accounts, forthright in urging Syria to halt the flow of arms to the guerilla group's military wing and pressing it to use its influence with Iran to encourage it to take up the Obama offer of engagement.
Equally, Mr Rammell reportedly made it clear that Syria can and needs to do more to halt the, albeit reduced, leakage of weapons and personnel to insurgents in Iraq.
British officials believe there is scope for improving intelligence co-operation on counter-terrorism after the shock to the Syrian system inflicted by the 27 September car bomb attack which killed 17 people in Damascus last year. But they are proceeding cautiously, apparently determined to establish that Syria has something genuine to offer before going too far.
Similarly on the wider stage. Israel would no doubt like to see the displacement of Hamas and Islamic Jihad offices in Damascus as a precursor of any thaw. But some Western diplomats believe a more realistic olive branch might be a firm commitment to seal fully its border with Iraq to insurgents as American forces prepare to leave. "It's a way of helping America and it's a card that only has a limited shelf life", said one. "They might as well play it now." Some statements from Syrian officials have suggested it is only the US that needs to change its attitude to Syria, not vice versa.
On the other hand, John Kerry, the chairman of the Senate Foreign Relations Committee, is among those arguing that he is "willing to do the things that he needs to do" to change the relationship with the US.
Either way, average Syrians seem pleased at Bush's replacement. "I am very happy about Obama," said taxi driver Salah Qadri, 56. "I hope with a new [US] President things will change." And no, on balance this was not only a matter of the US altering its attitude to Syria, "Maybe we need to change some small things on our side too."
Syria: The statistics
*Population 19.7m
*GDP per capita £3,200
*Oil exports 254,500 barrels a day
*Heritage What is now Syria was a crucial trade crossroads and hence conquered again and again in ancient times, from the Hittites in 1600 BC to the the Byzantines 2000 years later. St Paul had his conversion on the road to Damascus in between. In the sixteenth century AD, Ottoman Sultan Selim I took the territory from the Mamelukes, and ruled it for most of the next four hundred years.
*Modern times As Europe divided up south-western Asia at the end of the First World War, oil discoveries made Syria a valuable territory once more. Hashemite leader Faisal I established an independent Arab kingdom in 1920, but French forces clashed with his troops later that year and established control of Ottoman Syria.
After years of negotiations, Syrian nationalist groups finally won their independence from France in 1946. But for the next twenty years, the country was subjected to a string of military coups, the first of which came in 1949, when Colonel Husni al-Za'im took power after the country was part of a humiliating defeat in the Arab-Israeli war.
Before 1956, the country had 20 cabinets, and four constitutions; in 1958, it joined Egypt as part of a United Arab Republic. But in 1963 the union fell apart.
*Autocracy Three years after the loss of the Golan Heights to Israel, Hazef al-Assad seized control in 1970, and governed with an iron fist for thirty years. After years of conflict with the west Syria joined the coaltion against Saddam Hussein in 1990, and held talks with Israel the next year.
When Hazef's son Bashar succeeded in 2000, there was a short period of political reform, and Syrian troops evacuated Beirut. But soon tight controls were reasserted, and Syria's categorization by George W Bush as part of the Axis of Evil heralded a new period of poor relations, which reached its zenith with the assassination of former Lebanese Prime Minister Rafik Hariri in 2005.
*A new thaw In 2008, Bashar al-Assad meets with Nicholas Sarkozy in Paris, and establishes relations with Lebanon for the first time since the 1940s. Obama administration seems to signal a new chance of compromise.

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