The Catalan club were knocked out of the Champions League last week after a 2-1 aggregate defeat to Atletico Madrid and a 1-0 loss to Granada in the Premiera Division on Saturday saw them fall four points behind the leaders in the title race with just five games left to play.
However, although he has acknowledged it will be a difficult task, the midfielder has insisted that his side can overcome Madrid on Wednesday.
"I am convinced we have the potential to win the cup, but we will need to be at our best against a very powerful opponent,” the Spaniard told Sport.
"The team is able to play well and win. Winning the cup will give our fans a lot of joy and it would probably save the season.
“However, winning a trophy does not change anything. In the league we have taken a step backwards and we were eliminated from the Champions League last week.
“We are still on track to win the league and the cup but we will have to analyse whether it has been a good or bad year at the end of the season.
"We never want to lose, but things don’t always go well in your work. Life’s better when you’re winning and doing things right and we are the first to be self-critical, we never shirk responsibility.”
The 29-year-old believes the absence of Cristiano Ronaldo will not make a difference to Real Madrid as they are “very powerful” even without their star player. As a result, Iniesta believes it is important for his team to play in their own style in order to control the game.
"Cristiano is very important for them as he scores a lot of their goals but I don’t think Real Madrid will change their game as a result of Ronaldo’s absence.
"We're confident and know where we can do the damage. If we're playing at our top level, we will have many chances to win the game."