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MARCO WERMAN: I'm Marco Werman and this is The World, a co-production of the BBC World Service, PRI, and WGBH in Boston. President Obama is taking the first steps toward unfreezing relations with Iran, reportedly drafting a letter to offer direct talks between the two countries. Meanwhile, there are new tensions emerging between Tehran and Europe. The World's Laura Lynch reports.

LAURA LYNCH: It's one of the few things the US and Iran actually agrees on � the leftist People's Mujahadeen, responsible for killings and assassinations inside Iran, are terrorists. Europe was onside, too, until this week. The European Union has taken the group, also called the PMOI, off the blacklist � unlocking tens of millions of dollars its members hold in European banks. The leader of the political wing of the group, Maryam Rajavi, was in Brussels when the announcement was made.

MARYAM RAJAVI: Finally, justice prevailed. The unjust label on the PMOI has been removed.

LYNCH: EU ministers tried to downplay the move, claiming it was forced to take the group off the list because of a court ruling � a ruling that's now under appeal. Nevermind the legal niceties. On the streets of Tehran, protestors labeled the move an �astounding act or hypocrisy� for those who vow to fight terrorism.

PROTESTOR: �They are world famous terrorists. They have killed our youths and our people and they have bombed our presidential office and killed 72 of our beloved people.

LYNCH: That is true. Back in 1981, a bomb attack killed the chief of the judiciary and 71 other senior officials. Militants fled to Iraq, where Saddam Hussein allowed them to set up a base to launch their attacks on Iran. That is, until 2003, when U.S. troops arrived and barred them from leaving the camp. The former fighters have now renounced violence and disarmed. But the new Iraqi government is now shutting the camp down and telling the 3,000 people there to leave within two months. That's where the EU's decision to delist the group comes in. A former member of the group who now lives in England, Massoud Hohdabanday, is working to bring at least 1,000 of them to Europe. Hohdabanday says if Europe doesn't welcome them, there's a risk they will return to violence.

MASSOUD HOHDABANDAY: And if they go back to terrorism, then it would all backfire on the European Union. There is a responsibility here as well, because now they have been taken off the list. So the only way forward is to continue it and make sure that they come back to some normal societies and get back into normal life.

LYNCH: The PMOI's political leader, Maryam Rajavi, is already urging Barack Obama to follow Europe's lead.

MARYAM RAJAVI: Maintaining the PMOI on the US State Department's list has no justification and it is illegitimate more than ever before. I hope the new administration of the United States will make the most important aspect of change, that is putting aside the policy of appeasement with the Mullahs and delisting the PMOI.

LYNCH: With Obama reaching out to Iran, it seems unlikely he'd do anything that risks rupturing relations even further. It marks a clear split between the US and Europe at a time when both are supposed to be working together to pressure Iran to end its nuclear program. Shada Islam is a specialist on EU-Iranian relations. She expects some trouble ahead.

SHADA ISLAM: I think some members of the Iranian government, the more radical ones, will probably try and do that. I don't think the EU and the US is going to allow that because I think there is a general consensus in the West - in the European Union and the U.S. that it's better to stick together when dealing with the Iranians. But I wouldn't be surprised if the Iranians were to try and drive a wedge between these two.

LYNCH: In the midst of all this, though, is another sign that relations aren't all that bad. Representatives of Iran have been in Brussels in the last few days, pitching the promise of a stable supply of energy. Islam isn't surprised.

ISLAM: Business is business. The European Union is very energy hungry. The European Union is tired of its dependence on Russian oil and gas and is looking to diversify its imports, its supplies. I think they will talk to the Iranians about these issues.

LYNCH: The Europeans are also likely talking to Iran behind the scenes, reminding them the court ruling is under appeal � suggesting that while the People's Mujahadeen may no longer be on Europe's blacklist, members shouldn't expect a warm welcome, either. For The World, I'm Laura Lynch, in London.