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former IAEA Director-General

Iran Not Receptive to Revised Nuclear Proposal
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Peter Crail

The United States indicated that it intends to pursue additional UN sanctions against Iran after Tehran did not accept a June proposal for negotiations regarding its nuclear program. Plans for a fourth Security Council sanctions resolution may not be forthcoming, however, as Russia appears to be focused on continuing the six countries' negotiating track with Iran rather than seeking further punitive measures. Moreover, deteriorating relations between Moscow and the West following the Russian conflict with Georgia in August might strain efforts to reach agreement on an approach toward Iran.

The negotiations proposal, which was crafted by the five permanent members of the UN Security Council (China, France, Russia, the United Kingdom, and the United States) and Germany, outlined a series of incentives that Iran would receive in return for suspending its nuclear fuel-cycle activities, building on a previous proposal from June 2006. (See ACT, July/August 2008. ) The renewed proposal included an implicit offer that, during preliminary discussions for negotiations, the six countries would not pursue additional sanctions so long as Iran agreed not to expand its uranium-enrichment facility further.

Tehran has insisted that it would not suspend its uranium-enrichment-related activities and the construction of its heavy-water reactor, key requirements of the incentives proposal and four Security Council resolutions.

On July 19, the six countries discussed the proposal with Iran in Geneva. In a reversal of Washington's insistence that it would not send a representative to meet with Iran until it fulfils a Security Council demand to suspend its nuclear fuel cycle activities, Undersecretary of State for Political Affairs William Burns participated in the Geneva discussions. The Geneva talks followed a June meeting in Tehran when five of the six countries, excluding the United States, presented the proposal to Iranian officials.

During the July 19 meeting, Iran presented a framework and timetable for comprehensive negotiations on its relationship with the West, suggesting that the agenda for such negotiations be based on the commonalities of the six-country proposal and a proposal by Tehran delivered in May. (See ACT, June 2008. ) Iran's proposal to the six countries also contained a variety of topics for comprehensive negotiations but did not include any commitments that Iran would make in regard to its nuclear program.

Following the meeting, EU High Representative for the Common Foreign and Security Policy Javier Solana told a press conference that the six countries did not have "an answer to the most important question," regarding Iran's willingness to suspend its fuel cycle activities. He indicated that the six countries were hoping to get answers from Iran regarding their proposal "in a couple of weeks."

Iran provided the six countries with an additional response Aug. 5. Department of State spokesperson Gonzalo Gallegos told reporters Aug. 6 that, following a discussion between the political directors of the six countries, there was consensus that it did not meet their expectations for a clear response from Tehran. He added that because the six countries had not yet received a definitive, positive response from Iran regarding the incentives package, they "are discussing next steps in the UN Security Council and beginning to consider the possible outlines of another sanctions resolution."

Although Washington has expressed interest in moving forward with a fourth UN sanctions resolution, Moscow does not appear to be ready to entertain additional sanctions at this point. When asked Aug. 6 whether there were plans for an additional sanctions resolution on Iran, Russian Permanent Representative to the United Nations Vitaly Churkin stated, "[T]here has been no firm agreements, or understandings, or any kind of concerted work in this regard." He stressed that the six countries had not established any deadlines and that "there is ongoing dialogue" with Iran.

A European diplomat told Arms Control Today in June that an additional sanctions resolution was unlikely to be agreed on this year and that the countries were more likely to focus on implementing the existing UN sanctions.

As part of efforts to carry out current UN sanctions, the 27-nation European Union Aug. 7 agreed on a series of additional sanctions on Iran. These sanctions primarily instituted measures against Iran that the Security Council "called upon" but did not require states to carry out in Resolution 1803, adopted in March. (See ACT, April 2008. ) Such efforts include a decision that EU members will inspect cargo to and from Iran carried by Iran Air Cargo and the Islamic Republic of Iran Shipping Line if "there are reasonable grounds to believe" that the cargo contains goods that might aid Iran's nuclear and missile programs.

In addition, the EU legislation calls on its members to exercise "restraint" in providing public financial support for trade with Iran, such as granting export credits, guarantees, or insurance. As a bloc, the EU remains Iran's largest trading partner, but due to sanctions and pressure on European firms not to do business with Iran, China has overtaken Germany as Iran's single-largest trading partner over the last year.

The EU measures also require that European financial institutions closely monitor any dealings with Iranian banks, in particular Bank Saderat, Iran's second-largest bank. Resolution 1803 cited Bank Saderat, along with Bank Melli, Iran's largest bank, for special consideration when calling on all states to "exercise vigilance" over financial activities with Iranian banks. The EU placed sanctions on Bank Melli in June, requiring the bank to close its offices in Hamburg, London, and Paris. (See ACT, July/August 2008. ) The United States and the EU have accused Bank Melli of involvement in proliferation financing and Bank Saderat of terrorism financing.        

According to an Aug. 14 International Monetary Fund (IMF) report regarding Iran's economy, the financial sanctions against Iranian banks appear to have had some effect on their operations. The report observed that some of Iran's state-owned banks were undercapitalized, stating that "UN and U.S. sanctions against certain Iranian institutions have created difficulties for trade financing and payments, discouraged foreign investment, and adversely affected" their profitability.

In addition to recommending caution in dealing with Bank Melli and Bank Saderat, the Security Council required that all states freeze the assets of Bank Sepah, Iran's third-largest bank, in March 2007.

Overall, however, the IMF concluded that Iran's economy is likely to continue to experience growth due to revenues from high oil prices, particularly if oil remained above $110 per barrel. Oil settled to about $115 per barrel at the end of August after rising to a record high of about $147 in July.

Posted: September 2, 2008