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White House officials say the move will be declared next month.

The Bush administration will announce in mid November, after the presidential election, that it intends to establish the first U.S. diplomatic presence in Iran since the 1979-81 hostage crisis, according to senior Bush administration officials.

The proposal for an "interests section," which falls short of a full U.S. Embassy, has been conveyed in private diplomatic messages to Tehran, and a search is under way to choose the American diplomat who would head the post, the officials said.

They spoke on condition of anonymity because the step hasn't been announced and discussions of it have been limited to a small circle of government officials.

It's not known how Iran has responded. Iranian President Mahmoud Ahmadinejad said last month that he would consider the idea, which first surfaced over the summer.

The question of whether to deal directly with Iran has punctuated the U.S. presidential campaign.

Sen. Barack Obama, the Democratic nominee, has criticized the Bush administration's penchant for not talking to U.S. enemies, and has indicated that he would hold direct talks, even with Ahmadinejad.

Republican nominee Sen. John McCain has ridiculed Obama and his foreign policy as naive.

U.S. sanctions elite Iran military unit

The Bush administration is imposing new sanctions on Iran's Revolutionary Guard Corps, accusing it of illegal trade in missile technology and weapons of mass destruction. Elements of the Revolutionary Guard are already penalized under an order that took effect last year, but Thursday's announcement by the State Department covers the entire organization along with 12 other private companies and military units from China, North and South Korea, Russia, Sudan, Syria and the United Arab Emirates. The sanctions, which are valid for two years, bar any U.S. aid, contracts and arms sales or other defense transfers to any of the identified entities.

Associated Press