LONDON: In the smoke-filled cafes of central Damascus, where young unarmed activists discuss the next protest against the Assad regime, the mood is one of determination and excitement. It takes huge courage to risk arrest, torture and the chance of a bullet for something as basic as attending a demonstration.

People are outraged by the government's violence and what they see as its flimsy offers of reform. They feel solidarity with cities like Homs and Idlib, where popular resistance has for the moment been broken. But when you ask protesters in the Syrian capital, as I did during a recent 12-day visit, whether they see an imminent downfall of the regime, the mood swings to pessimism. In spite of a trickle of defections, the security forces remain firmly on the government's side. The fourth armoured division, which led the onslaughts on Homs and Idlib, is commanded by the president's younger brother, Maher al-Assad, and made up largely of members of the ruling Alawite community. No cracks there.

Will sanctions make a difference? Unlikely. The travel bans that the European Union has placed on Assad and his family are pinpricks, while the ban on European companies working in Syria's oil sector and the embargo on its oil exports are harming millions. Gross domestic product went down by 6 per cent last year, while inflation rose by 17 per cent. Thousands are being laid off. Prices for cooking gas and the diesel which most Syrians use to heat their homes have sky-rocketed. We may be seeing the start of a replay of Iraq in the 1990s when sanctions left Saddam Hussein and his regime unscathed while impoverishing a nation.

The Syrian National Council, the fractious grouping of opposition exiles, wants a Libyan-style Nato intervention, and in battered cities like Homs, people plead for military aid. But in Damascus, where critics of the regime can weigh the options more calmly, almost nobody wants outside forces.

Do you support arms being sent to the rebels, I asked activists who took me to an illegal protest? “If you give more arms, there is a risk that more people get them and there's civil war. You don't know what will happen afterwards,” came the reply. Older radicals who have spent years in prison are equally opposed to foreign intervention. They saw a million Iraqis flee to Syria because of sudden regime change, and a civil war sparked by foreigners and have no desire for the same fate.

But can there be dialogue between opposition and government, on the lines that Kofi Annan, the former UN secretary-general, is trying to bring about? Most oppositionists are sceptical after the numerous calls for reform were rejected by Assad in his first decade of power. The spilling of so much recent blood has widened the gulf.

But Damascenes who have not yet taken sides see dialogue as the only hope. Nabil Sukkar, a former World Bank economist who runs a private consultancy (and met Annan last week) told me: “We are in the silent majority who want reconciliation and a peaceful transition to democracy. Unfortunately, neither side is willing to compromise. Both sides are to blame.

“The regime has used force but the opposition is pretty well armed and getting more so. Russia is extremely important in putting pressure on the regime. We also need someone who could put pressure on the opposition.”

Under Russian coaxing, the government now accepts international mediation — a big shift from a year ago. But mediation will require the opposition and its western and Arab League backers to stop insisting Assad surrenders power before talks begin. “No one dares to confront the street and say we need dialogue,” says Jihad Makdissi, the foreign ministry spokesman. “You need a statesman, a Nelson Mandela, who can say, I've suffered. I've been in prison but I'm willing to talk.”

Whether the government is ready for a genuine shift from minority rule to pluralistic democracy will only become clear if Annan succeeds in brokering negotiations. Makdissi and other spokespeople say the government can accept local ceasefires if international monitors verify that rebels have disarmed. The security forces will withdraw from cities if there are guarantees that rebels do not claim to have liberated them.

Western governments seem to be abandoning military options. The US is concerned about Al Qaeda, the latest bombings in Damascus and Aleppo perhaps another example of its role in exploiting chaos. France has rejected Saudi and Qatari calls for arming the rebels. These are welcome steps. The next is for the west to support Annan's approach of a simultaneous cessation of hostilities by both sides. Then dialogue on a political transition could start, without preconditions.

By arrangement with the Guardian