Suzanne Maloney thinks it's the best bet:
Negotiations in the absence of mutual trust present a difficult dilemma but not a hopeless one. The depth of the estrangement that exists today between Washington and Tehran is hardly less fierce than it was during the hostage crisis, yet ultimately a mechanism for dialogue and a resolution to the standoff was found largely because both sides could ascertain no better alternative to achieve their interests. Even then, it took repeated forays and failures in diplomatic outreach by both sides, the persistent efforts of a well-situated objective intermediary, and a considerable investment in staff work to ensure preparation, mediation, and implementation of the complex financial, legal, security, and other dimensions of a bargain.
Paul Pillar factors in the effect of sanctions:
Western negotiators need to persuade the Iranians that concessions on their part will lead to the lifting of sanctions. This may be hard to do, partly because the legislation that imposes U.S. sanctions on Iran mentions human rights and other issues besides the nuclear program, and partly because many U.S. hawks openly regard sanctions only as a tool to promote regime change or as a necessary step toward being able to say that “diplomacy and sanctions have failed,” and thus launching a war is the only option left. The challenge for the Obama administration is to persuade Tehran that this attitude does not reflect official policy.