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(SACRAMENTO, Calif.) — Gov. Arnold Schwarzenegger says he will veto legislation that would have given California the nation’s most ambitious renewable energy standards.

Instead, a spokesman said Saturday that Schwarzenegger will sign an executive order mandating a similar change but without elements the governor objects to.

The measures approved by the state Legislature Friday night would have required California to get a third of its energy from renewable sources like wind, solar and geothermal by 2020.

Schwarzenegger supports that goal.

But his spokesman, Matt David, says the legislation lawmakers approved is a protectionist scheme that will kill the state’s solar industry and drive up prices for consumers.

(Read “The Truth About Wind Power.”)

“Healthcare is hard,” may be the Obama administration’s catch-phrase of the moment, but it’s a cakewalk compared with the challenge facing Obama on Iran. Under pressure to turn up the heat on the Iranians — from European allies, Israel and bipartisan consensus on Capitol Hill — Obama had demanded that the Islamic Republic respond by September to a Western offer to resume negotiations — or else face escalating sanctions.

Tehran’s response came this week, in the form of a package of proposed subjects for talks that included non-proliferation of nuclear weapons, but omitted any mention Iran’s uranium enrichment efforts that have been the focus of Western anxiety. It’s hardly the response that Obama had hoped for, but the U.S. and its five partners in the “P5+1″ negotiating group (France, Germany, Britain, Russia and China) went ahead and asked for a meeting with Tehran anyway — if for no other reason than to “test the proposition” that Iran is ready for dialogue, as State Department spokesman P.J. Crowley put it. (Read “How Obama Hopes to Restart Mideast Peace Talks.”)

The reality, of course, is that even if Iran is ready to engage in a serious negotiating process, its ideas on everything from the agenda and timeframe to the outline of an acceptable compromise will be markedly different from those of the U.S. and its allies. And this week’s statements from Russia and China opposing any new sanctions highlights the international differences of opinion on Iran that will only make things harder. Russia’s Prime Minister Vladimir Putin drove home that point in comments reported Friday, stressing that Moscow had no reason to doubt the peaceful intent of Iran’s nuclear program.

The U.S. and its allies are not saying Iran is currently developing nuclear weapons; they’re warning that allowing Iran to assemble the full nuclear fuel cycle to which it is entitled as a signatory of the Non Proliferation Treaty — particularly uranium enrichment — gives it an infrastructure that could quickly be converted to produce bomb materiel. Stating Washington’s case at the International Atomic Energy Agency in Vienna this week, Ambassador Glyn Davies warned that Iran had already created enough low-enriched uranium that, if it kicked out nuclear inspectors and reconfigured its enrichment plant, could be re-enriched to provide materiel for a single bomb. “We have serious concerns that Iran is deliberately attempting, at a minimum, to preserve a nuclear option,” Davies said.

Moscow sees the problem in terms of strengthening the safeguards against Iran weaponizing nuclear materials, rather than trying to prevent it attaining “breakout” capacity by denying its right to enrich uranium.

President Mahmoud Ahmadinejad reiterated this week that Iran no intention of ending uranium enrichment, or of negotiating away its nuclear rights. That doesn’t necessarily preclude a diplomatic solution to the standoff, but it underscores the likelihood that the Western powers might have to compromise on their own demands in order to achieve one. In some previous rounds of negotiation, Iran has been more open to discussing strengthening of the IAEA monitoring regime and other safeguards against weaponization. Right now, however, it’s far from clear that Iran is in an accommodating mood, given its fierce and ongoing domestic power struggle. (Read “A Nuclear Deadline Looms for Iran — and for Obama.”)

Ultimately the fate of diplomacy rests on three factors: Iran’s willingness to compromise; the West’s willingness to compromise; and, perhaps most important, the timeframe allowed for negotiations. President Obama is under considerable pressure to show that engagement with Iran produces results — but there may not be any by this fall, the unofficial deadline set by the Obama Administration. If that prompts Obama to seek further sanctions via the U.N. or impose them unilaterally, however, the resultant divide between the West and Russia and China will work to Iran’s advantage. New sanctions would also end immediate prospects for a diplomatic solution, because Iran has long declared that it won’t negotiate in response to ultimatums. And a continuing stalemate would leave Obama facing either the possibility of an Israeli air strike on Iran’s nuclear facilities, or being forced into escalating U.S. pressure until Tehran cries uncle. Both options could greatly destabilize the Middle East.

At least on health care, Obama can claim victory with incremental change. On Iran, there is no incremental option: Unless Tehran is ready to back down — which appears highly unlikely — the President will be pressed to raise the stakes. And then the game gets truly dangerous.

The outcome of the standoff over Iran’s nuclear program may depend less on the results of Friday’s presidential elections in the Islamic Republic, than on a decision to be made between now and September 1,500 miles to the northwest, in Moscow. The Russian government has, since the election of President Barack Obama, been playing along with U.S. and European efforts to curb Iran’s nuclear ambitions. But the consensus in Washington is that getting Russia to back and apply tougher economic sanctions against Iran will be much harder.

Moscow’s stance on sanctions matters because no matter who wins Friday’s election, both the frontrunners made clear that they had no intention of giving in to Western demands that Iran halt uranium enrichment. The real decisions about Iran’s nuclear future will be made by the clerical Supreme Leader, Ayatollah Ali Khamenei, who continues to defy the U.S., Europe and the International Atomic Energy Agency. So, Washington believes that coordinated international pressure is the only chance the West has to talk Iran back from the nuclear brink. And Russia, which is helping Iran build its nuclear reactor at Bushehr and which is one of Tehran’s key arms suppliers — as well as holding veto power at the U.N. Security Council — may hold the key to making tougher sanctions work. (See pictures of Russia celebrating its greatest military triumph)

The Administration’s Iran policy czar, Dennis Ross, is preparing a package of sanctions to be adopted by the Security Council in the fall, that would target not just Iranian companies linked to Tehran’s nuclear and missile programs, but also its struggling energy sector. Unfortunately for the U.S., Russia is disinclined to go along with broadening the impact of sanctions. “We should keep [sanctions] within the international non-proliferation efforts, and everything else that may be imaginable in other efforts goes beyond our goal,” Russian deputy foreign minister Sergei Ryabkov recently told TIME.

Russia is certainly well placed to put the squeeze on Tehran because of its extensive business ties with Iran, including in the energy sector. For all its oil reserves, Iran’s energy infrastructure is old and failing, and it is forced to import a large proportion of its gasoline needs. Washington believes the regime will be responsive to moves by the outside world to blocks improvements and investment in its energy sector. Russian support is also key to achieving an international consensus for raising the pressure on Iran — if it signs on for new sanctions, the chances are much higher of achieving broad agreement at the U.N. in September.

Russia has been in a more cooperative mood since the advent of the Obama Administration, not least because the new President has been more responsive to Russia’s own concerns on issues unrelated to Iran. “It is a sea of change in comparison with the previous administration, and we appreciate greatly this change,” says Ryabkov. “And we hope that the American administration values this engagement on our part on so many fronts.” On Iran, the Russians won’t rule out backing broader sanctions, and say they support using both carrots and sticks in dealing with Iran. But, says Rybakov, any discussion of the question ahead of the September U.N. General Assembly session would be “hypothetical.”

Aware that it needs Russia’s help, the Obama Administration has been looking for ways to persuade Moscow to support tougher sanctions. In a secret letter in March, Administration sources tell TIME, Obama promised President Dmitri Medvedev that the U.S. would freeze plans to install an anti-missile system in eastern Europe to which Russia strongly objects if Russia helped curtail the Iranian nuclear program. The U.S. has also initiated high-level nuclear-arms reduction talks with Moscow, and President Obama hopes to visit the Russian capital later this month in hopes of advancing — or even signing — a new nuclear pact.

The Russians appreciate all this. “We clearly value this very intense and in-depth dialogue on non-proliferation,” says Ryabkov. But will it buy any help on Iran? When it comes to the missile-defense program, he answers, “We do not think that this linkage is fair,” because Russia believes the anti-missile system Washington had planned to station in Poland and the Czech Republic would not help defend against a potential Iranian threat. Russia loves the revival of arms-control talks with the new Administration, but it sees Iran’s nuclear program as a separate issue — on which it’s holding its cards close.