TEHRAN -- There is only limited evidence to support U.S. President Bill Clinton's depiction of Iran as a country bent on terrorism and rushing to acquire nuclear arms, according to diplomats closely studying developments in Iran.


Iran may hope to develop nuclear weapons in a decade, those diplomats say, and does give rhetorical and some financial support to outlaw groups. But the diplomats and other analysts in the region suggest the threat from Iran is exaggerated by the United States, and that the American plan to isolate Iran may only increase the regime's radicalism.


And the more cautious assessments of Iran by other Western countries will make it difficult for Clinton to gain the support necessary to make an embargo effective. "The U.S. is out alone on this one -- no one else agrees with it," said a European diplomat, who agreed to be interviewed on the condition that neither he nor the country he represents be identified.


Few in Iran doubt the radical inclinations of the Islamic government. But the diplomats say the country's ability to act is seriously hampered by divisions within the regime, serious economic troubles and a realistic concern for consequences.


Instead, the analysts say the United States and Iran each has overblown fears of the other, fed by superheated rhetoric from both sides.


In announcing the U.S. trade embargo, Clinton cited Iran's "drive to acquire devastating weapons and support for terrorist activities," concern motivated in part by Russia's determination to build an atomic power plant in Iran despite American protests that the plant could eventually supply the nuclear material for an atomic bomb.


But observers in Iran and elsewhere in the Middle East say that could be a slow process: It would take about five years to build the plant and another five years to produce enough nuclear fuel for a weapon. There has always been concern that Iran may try to buy nuclear fuel to speed up that timetable.


But observers here say they have seen no hints that cash-strapped Iran is trying to do so. "There's no evidence Iran has an accelerated program" to acquire nuclear weapons, said a military intelligence source.


Similarly, Iran's support for terrorism has been on a low boil, say diplomats. Its financial contributions to the Hizbollah guerrillas in Lebanon have reportedly dropped with the worsening of Iran's economy. Iran's ties are tenuous with Palestinian opposition groups, most of which are composed of Sunni Moslems, not the Shiite Moslems of Iran.


Some countries looked suspiciously toward Iran after bomb blasts in Buenos Aires and London last July killed nearly 100 people. But no evidence has linked the blasts to Iran, and Scotland Yard is said to be unconvinced of Iranian involvement in the London blast.


But Iran does remain unpredictable, and diplomats acknowledge that the country would probably like to have nuclear weapons. "If I had Saddam Hussein as my neighbor, along with Pakistan and India, and Israel not far off, and Russia to the north, I would be interested in nuclear weapons, too," said a diplomat stationed in Iran. "But they don't have the infrastructure for it."