Istanbul—In the battlefield cities of Homs, Idlib and Deraa, Syria’s security forces have fought the rag-tag opposition army to a standstill. At the negotiating table, though, the opposition has gained the initiative. On Sunday, representatives of most of the main opposition groups met in Istanbul, Turkey, to agree on a united front to negotiate with Syria’s president, Bashar al-Assad. The West’s foreign ministers also attended the meeting in a major show of solidarity with the opposition.

Earlier this week both Russia, a long-time backer of the Assad regime, and the Arab League backed a peace plan thrashed out by former U.N. secretary general Kofi Annan that calls for a ceasefire followed by talks between Assad and his opponents. Most significant of all, al-Assad himself signaled that he was willing to go along with the Annan plan. Just weeks after a Russian and Chinese veto derailed U.N. sanctions against Damascus, a diplomatic solution to the year-long insurgency may be taking shape.

“If United Nations Security Council does not take on the responsibility, the international community will have no chance but to accept Syrians’ right to self-defense,” Turkey’s prime minister Recep Tayyip Erdogan said at the opening of the Friends of Syria conference. But he also signaled that he viewed the Annan plan as an exit strategy for Assad, not a way for him to remain in power. “It is not possible for us to support any plan that would help a regime that oppresses its own people stay in power.”

That’s definitely not how Syria, or her allies in Moscow and Beijing, see the Annan plan. Syria’s Foreign Ministry spokesman Jihad al-Makdissi declared victory over the rebels on Saturday, telling Syrian TV that “the battle to topple the state is over.” And last week Russia’s President Dmitry Medvedev, too, backed the Assad plan, saying it “may be the last chance for Syria to avoid a protracted bloody civil war … We will be offering you our full support at any level in which we have a say.”

Clearly there’s still a massive gulf remaining to be bridged.

The Assad regime, according to one Western diplomatic observer present at Sunday’s meeting, sees the Annan plan as a “face-saving” way for the opposition to accept “some package of limited pro-democracy concessions in exchange for giving up their armed struggle” with the government. The opposition, on the other hand, is busy gathering international support and arms to continue the fight.

Saudi Arabia is emerging as the opposition’s treasury and arsenal—raising the prospect of the Syrian civil war turning into a proxy Sunni-Shia conflict between Sunni Saudi Arabia and its arch-enemy, Shia Iran, a long-time backer of the Assads. That’s a nightmare scenario that U.S. Secretary of State Hillary Clinton has been working hard to avert. Clinton met with top Saudi officials in Riyadh on Saturday to discuss ways to continue pressure on Damascus without escalating the armed conflict. But Saudi Foreign Minister Saud al-Faisal insisted at a joint news conference with Clinton that arming the Syrian opposition was a “duty,” because the opposition “cannot defend itself except with weapons.”

In Istanbul in Sunday Burhan Ghalioun, head of the Syrian National Council, or SNC—an umbrella group for the Syrian opposition—repeated calls for arms and money to topple Assad. “We have called for the need to arm the Free Syrian Army so that it may defend the lives of the Syrian people,” said Ghalioun. He also rejected Assad’s acceptance of the peace plan as a “lie and a tactical maneuver … We have no illusions over the possibility of the [Annan] mission’s success because Bashar Assad and the Syrian regime have no credibility to engage in a political process.”

Ghalioun’s skepticism is rooted in experience—last November Assad agreed to a very similar ceasefire-and-negotiation deal proposed by the Arab League. He promised to free political prisoners, withdraw troops from cities and start talks with the opposition—but instead intensified the assault on the rebel stronghold of Homs. The Annan plan, like the failed Arab League plan, contains no timetable for implementation.

The SNC, also, remains deeply divided. Ghalioun, an academic based in France, came under fire from Kurdish representatives, who said that their demands for autonomy were not getting sufficient attention. Veteran activist Haytham al-Maleh, a former judge who has been repeatedly imprisoned by the regime, walked out of the meeting, claiming that the movement was dominated by expatriate dissidents. And the U.S. is worried that the biggest grouping in the SNC remains the Muslim Brotherhood, who have links to radical Islamist movements.

Meanwhile, the regime and the opposition both appear to be continuing to prepare for continued hostilities. The SNC announced Sunday that rebels would be receiving funding from Gulf states. And Turkish Foreign Minister Ahmet Davutoglu hinted that Turkey might implement a “safe area” for refugees inside Syria’s northern border, opening the possibility of the kind of no-fly zone enforced in northern Iraq between 1992 and 2003. On the ground, the regime continued its mopping-up operations against rebels in the southern province of Deraa, the northwestern province of Idlib and the central region of Homs, killing at least 25 people on Saturday according to the U.K.-based Syrian Observatory for Human Rights.

The Annan plan is the first peace deal to which all sides have agreed, and Sunday’s conference is the first time that most of Syria’s opposition has shown a more-or-less united front. But both the Assad regime and the opposition, according to the Western diplomat, “are still playing to win,” not to negotiate. The Syrian civil war is still far from a resolution.