Barack Obama's election as U.S. president and the world financial crisis present an opportunity to halt the Iranian nuclear drive through diplomacy, Military Intelligence head Amos Yadlin said Monday.

Iran, for example, has been stung by lower global oil prices in recent months.

Obama's election also sets the stage to apply international pressure on Iran to abandon its nuclear aspirations, Yadlin said. He stressed that he is not opposed to direct talks between the United States and Iran, saying that "dialogue is not appeasement."

"Iran will do anything not to be cornered into the position of Iraq or North Korea," he said at an annual lecture in honor of late Israel Defense Forces chief of staff Moshe Dayan. "Iran is also very susceptible to international pressure because of the crisis."

Concerns by moderate Sunni regimes in the Middle East about the Iranian nuclear program were an encouraging sign, Yadlin added. But Iran is continuing its efforts - albeit cautiously - to develop offensive nuclear capabilities. This is being done stealthily to avoid attracting attention, he said.

Yadlin, who spoke at the lecture at Tel Aviv University, also said Israel's military deterrent power had not been as strong since 2000. He predicted "a low probability" for a calculated attack on Israel by one of its neighbors.

By contrast, the likelihood of small-scale attacks is very high and could escalate into a bigger conflict after Israel responded, he said.

Yadlin also addressed peace talks with Syria, revealing for the first time assessments he shared with decision-makers. He said Damascus might make peace with Israel, but only if Israel gave in to all of Syria's demands. He said that even then, Syria would not cut its ties with terror groups.

Syrian President Bashar Assad is nonetheless interested in peace, Yadlin added, for an asking price which is well known - Israeli withdrawal from territories captured during the 1967 Six-Day War and a U.S. package that will guarantee the Assad regime's stability and provide it with financial and military support.

Referring to Hamas-ruled Gaza, Yadlin said Israel could deal with two Palestinian entities, working toward peace with moderates in the West Bank while confronting Islamic militants in the Strip.

The past year has yielded some positive developments in the Middle East, in contrast to the "two difficult years" before, Yadlin said. He cited the first signs of American success in stabilizing Iraq, including the difficulties of Jihadist organizations there such as Al-Qaida.

Yadlin - who had served as IDF military attache to Washington and as head of the National Defense College - said the end of U.S. President George W. Bush's administration was being received "with a sigh of relief in the Middle East, with cautious hope for peace."