The threat of punitive sanctions, with or perhaps without UN security council blessing, is designed to concentrate minds in Tehran distracted by the divisive aftermath of June's presidential election. But it also serves to discourage the Israelis – at least for now – from taking matters into their own hands by launching a unilateral military strike on Iran's nuclear facilities. Israel's leaders do not believe dialogue or sanctions will work. But they calculate cynically that they must give Obama's diplomacy a chance to fail.
The reason we are looking at a 60 day time cap on potential US engagement though dialogue is that Tel Aviv has given Washington its marching orders as to precisely when an attack against Iran will begin.
Sanctions are not going to work, as certain countries, such as Russia, will ignore them with impunity. There is no chance in hell that the UN will approve of more severe sanctions, as Russia and China will veto them.
We may we well be looking at some kind kind of "October Surprise", involving some kind of military campaign that would be a joint US/Israeli strike. The US and Israeli military are profoundly integrated at every level, as current joint exercises recently in Nevada have demonstrated.
Russian diplomats have warned both the US and Russia that such an attack against Iran will be the trigger for WW3.
Unfortunately, the collective hubris in Tel Aviv and Washington may just make that so.