FROM THE ECONOMIST INTELLIGENCE UNIT
Iran has won another round in its dispute with Western powers over the direction of its nuclear programme. The EU and the US maintain that their decision to delay a move to refer Iran to the UN Security was only a tactical retreat, and should not be taken as a signal of weakening resolve. However, there is a spring in the step of Iranian diplomacy, and Tehran has shown its clear intention of pressing home its advantage. That is likely to entail seeking to restart negotiations with the EU and, preferably, other powers about the terms whereby Iran can proceed with its development of the full nuclear fuel cycle.
The current round began in early August when Iran rejected the proposals of the EU trio of France, Germany and the UK for advancing with a “proliferation-proof” civilian nuclear programme. Iran then proceeded to resume work at its Isfahan conversion facility--which produces uranium hexafluoride, and is the precursor for uranium enrichment. The EU3 called for an extraordinary meeting of the board of the International Atomic Energy Agency (IAEA) at which the question of referring Iran to the UN Security Council for a possible breach of the Nuclear Non-Proliferation Treaty (NPT) would be considered.
Nuclear apartheid
In the lead-up to the IAEA meeting, Iran pulled out all its diplomatic stops. This included an address by the newly elected president, Mahmoud Ahmadinejad, to the UN General Assembly. Mr Ahmadinejad sought to garner support from developing countries by coining the phrase “nuclear apartheid” to describe the process whereby the advanced Western countries were supposedly seeking to maintain their exclusive possession of advanced nuclear technology and the economic and social advantages stemming from it. His speech did not go down well with the US and the Europeans, but that was not his intention. Mr Ahmadinejad strongly upheld the rights of countries outside the Western elite, while affirming Iran’s commitment to enabling the UN to operate effectively as a genuinely multilateral agency. He also floated the idea of inviting Western firms to participate in Iran’s nuclear fuel cycle programme, thereby providing a means to certify its exclusively civilian scope.
Mr Ahmadinejad’s networking at the UN was complemented by a visit to Moscow by Iran’s vice-president, Gholamrezah Aghazadeh--whose previous jobs include oil minister and head of the Iranian Atomic Energy Organisation. Mr Aghazadeh’s task was evidently to make sure that Russia was serious in its stated opposition to a referral of Iran to the UN Security Council. Mr Aghazadeh went on to Vienna to join the IAEA deliberations. Emphasising Iran’s interest in settling this issue through negotiations, Mr Aghazadeh also said that Iran had no intention of pulling out of the NPT--a move that had been hinted at in Tehran as possible counter-measure to a Security Council referral. Ali Larijani, the new head of the Supreme National Security Council, which is nominally in charge of Iran’s nuclear policy, had also suggested that companies with interests in Iran’s oil and gas industry could be penalised if their governments continued to take a tough line on the nuclear issue. Japan, France, Italy and the UK have the most lose on this score.
The EU3 drafted a resolution that called for a referral on the grounds of Iran’s “failures and breaches of its obligation to comply” with the NPT, but decided not to present it formally to the board because of the strength of the opposition to such a move. The motion had sufficient votes among the 35 board members to pass, its supporters claimed, but the lack of a consensus risked undermining its effectiveness. There was also concern that Iran would react by lifting the suspension of its uranium enrichment operations. The EU has sought to keep up the pressure on Tehran by setting a deadline to suspend its uranium conversion activities, with automatic referral to the UN Security Council if it is not met. However, it is doubtful whether such a trigger mechanism will work in practice, even if it is approved.
No end-game in sight
Iran has pulled off a diplomatic victory in Vienna, but the essential elements of the dispute remain unchanged. Iran is seeking full sovereign control over all stages of its nuclear fuel cycle, with IAEA endorsement, and is proposing “objective guarantees” that the programme will never have a military dimension. The EU and the US have by no means given up their insistence that elements of the fuel cycle should be kept out of Iranian hands, as this would provide the only failsafe insurance against the diversion of material for military use. The Western powers base their suspicions on Iran’s proven record of concealment--something that Iran claims was necessitated by bilateral US sanctions. The EU has also argued that there is no urgent need for Iran to enrich uranium because it does not have any operating nuclear power stations to use the fuel—the almost-complete Bushehr plant is to run on Russian fuel. Iran has stated its intention to build a series of nuclear power stations, based on the economic argument that its abundant gas supplies can be put to better use in sustaining oil production, through re-injection into oilfields, and through being exported. However, Iran has yet to come forward with any specific nuclear power station projects.
Iran has maintained a consistently tough stance in the negotiations on the nuclear issue, but remains wary of the consequences of a complete breakdown. Iran’s economy has suffered from the effects of its poor relations with West since the 1979 revolution, and the clerical regime, in both its reformist and hardline hues, recognises the important role that foreign investment can play in improving overall economic performance. Iran’s oil and gas industries need the technological input of Western firms, and Iran’s infrastructure and industrial development also depend on healthy trade and investment relations with the outside world. Sanctions would therefore cause damage to Iran’s economy. One way of rendering the prospect of sanctions more distant would be for Iran to provide more investment opportunities for major companies in Europe, Asia, Africa and Latin America. To this end, Iran is seeking to tie Chinese, Indian and Japanese firms into strategic contracts in the oil and gas sector. There is also the prospect of MTN, a South African telecoms firm, securing a highly prized mobile-phone licence, and the government has recently floated the idea of launching tenders for the construction of nuclear power stations.
If Iran can develop these commercial relationships while stretching out the nuclear negotiations it will stand a good chance of realising the “win-win” outcome called for by its diplomats in Vienna. However, this will ultimately depend on whether the Western powers are willing to concede that they have limited influence over whether Iran chooses to exercise the option to develop nuclear weapons or not.
SOURCE: ViewsWire Middle East
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