Bloomberg News

IAEA to Press Iranians on Site Visits Before Iraq Meeting

May 21, 2012

United Nations inspectors met with Iranian officials to negotiate wider access to atomic facilities as diplomats seek to avert possible military strikes on sites suspected of housing work on a nuclear weapon.

Today’s International Atomic Energy Agency meeting in Tehran took place before Chinese, French, German, Russian, U.K. and U.S. negotiators, the so-called P5+1 group, convene a third round of parallel discussions with their Iranian counterparts in Baghdad on May 23. The UN atomic agency will probably issue its quarterly report on Iran’s uranium production this week.

Iran’s top nuclear negotiator, Saeed Jalili, called talks “positive” and “constructive” in a joint statement with IAEA Director General Yukiya Amano, Press TV reported from Tehran after the meeting concluded. The UN atomic agency declined to comment immediately on the talks.

Energy markets will be attuned to the talks as Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, faces tougher sanctions over its nuclear work. The European Union plans to impose an oil embargo beginning July 1 and Israel hasn’t ruled out attacking Iranian nuclear installations unless it stops enriching uranium.

The Islamic Republic’s oil exports, already down 500,000 barrels a day, may fall another 300,000 to 500,000 barrels a day when the EU’s embargo takes effect, according to Barclays Plc. Oil prices have slipped 7 percent this year.

‘Good Progress’

“It’s crunch time for Iranian nuclear negotiations,” Amrita Sen, an analyst at Barclays Plc in London, said in a May 18 interview. “The risk is that if a breakthrough doesn’t come and the negotiations are judged to be a failure, then it can be an upside risk for oil markets.”

Before leaving for Tehran yesterday, Amano told reporters in the Austrian capital that “this is the right time to try to reach agreement” with Iran to access more sites and people suspected of conducting nuclear work.

Amano was accompanied on his one-day visit by his top deputy, Argentine diplomat Rafael Grossi, and the IAEA’s lead nuclear inspector, Belgian engineer Herman Nackaerts. In addition to talks with Jalili, they were expected to see Foreign Minister Ali Akbar Salehi and Fereydoun Abbasi-Davani, director of the country’s Atomic Energy Organization, Iran’s state-run IRNA news agency reported today.

‘High, But Guarded’

“Expectations should be high, but guarded,” Cliff Kupchan, an Iran analyst at Eurasia Group, a New York-based research company, said by telephone on May 18. “There is a greater chance of a deal, at least an interim deal, than there’s ever been before.”

The P5+1 group and Iran agreed in April to hold a “sustained process” of step-by-step negotiations with reciprocity for actions that would alleviate international concerns over the Persian Gulf country’s nuclear work.

“Don’t look for the big breakthrough, look for steady and incremental process,” Peter Jenkins, a partner at ADRg Ambassadors LLP who hosted Iran discussions as the U.K.’s former IAEA envoy, said in a May 18 telephone interview. “Iran doesn’t want to be asked to give up something they can claim is a right for nothing. They’re going to ask the West what it’s prepared to offer in return.”

The Persian Gulf nation’s economy has been damaged by UN Security Council sanctions targeting its banks and prohibiting imports of goods that could be used for its atomic work. Its currency has plunged and the country’s inflation rate accelerated to 21.8 percent in April.

Sanctions Relief

“Iran is going to demand significant sanctions relief,” Kupchan said. “I don’t think the U.S.-led West will have the political space in the foreseeable future to provide the extensive relief that the Iranians are going to demand.”

More than 1 million barrels a day of Iranian oil could be removed from world markets in the third quarter because of sanctions, according to Kupchan, who worked at the U.S. State Department before joining the Eurasia Group.

“It probably will take at least one or two more rounds after Baghdad to reach any deal,” said Mark Fitzpatrick, director of the London-based International Institute for Strategic Studies nuclear disarmament program. “The deal in play is only an initial confidence-building measure, the first step of what would have to be several steps.”

Bargaining Chip

“Iran will not sign a deal with the IAEA until it can be used as one of its chips in the Baghdad meeting,” Fitzpatrick said. “The IAEA report will be a punctuation mark painting the increasingly dire picture of Iran’s program.”

Israeli Prime Minister Benjamin Netanyahu said he sees no evidence that Iran is serious about halting its nuclear program.

“Iran is good at playing this chess game,” Netanyahu said in a May 18 Prague speech. “They know sometimes you have to sacrifice a pawn to save the king.”

The Israeli premier said the Islamic Republic sees talks on the nuclear issue with world powers in Baghdad next week as an opportunity to deceive.

Some countries favor more than ever using a military strike to stem Iran’s nuclear ambitions, Russian Deputy Foreign Minister Sergei Ryabkov told reporters yesterday as he returned from the Group of Eight meeting in the U.S.

“Russia is concerned that an attempt to resolve this problem with military methods is still a possibility,” Ryabkov said. “We periodically get signals publicly and via private channels that certain capitals favor this option much more than they did up to this point.”

Fuel Supply

Major world powers may offer to secure Iran’s nuclear fuel supply for a research reactor as an incentive for the Iranian government to halt nuclear enrichment at the Baghdad meeting, a European diplomat said today at a briefing in Brussels.

Other potential incentives to be weighed at the May 23 meeting include nuclear safety assistance and a willingness to cooperate with Iran on counternarcotics, the diplomat told reporters under condition of anonymity.

Iran’s progress in enriching uranium up to 20 percent adds to the time pressure to reach a settlement, the diplomat said. European Union foreign policy chief Catherine Ashton will represent the major powers in the Baghdad talks.

Iran has to make the first step, the diplomat said, adding that a serious commitment by Iran to engage would lead to further meetings.

To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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