Bloomberg News

Iran Signals Flexibility as World Powers Seek Progress

April 05, 2013

Iran’s $100 Billion Nuclear Bill Adds Challenge to Reaching Deal

A technician works inside the turbine room at the Bushehr nuclear power plant in Bushehr, Iran. Photographer: Sajad Safari/Document IRAN via Bloomberg

Iran countered a proposal intended to address concerns over the Persian Gulf country’s nuclear ambitions by urging world powers to outline their vision for bringing the decade-long dispute to an end.

Iran wants to define the “dimensions” of the negotiating process as well as its “final outcome,” Ali Bagheri, deputy secretary of Iran’s supreme national security council, said today in Almaty, Kazakhstan, where a new round of talks began. The Islamic republic’s counterparts said earlier they expected “concrete” progress from the meeting.

“Confidence-building measures are measures that both sides in an agreement need to take,” Bagheri said through a translator. “They are part of a comprehensive set of measures.”

While Iran seeks a lifting of sanctions saddling its economy, world powers have offered some easing of the restrictions in return for halting atomic work they say may enable weapons production. Iran’s nuclear costs, estimated at $100 billion and rising, may make compromise more difficult as diplomats seek a breakthrough in Kazakhstan.

The U.S., one of six world powers engaged in negotiations with Iran, earlier said the group expected a substantive reply to an offer made six weeks ago in Almaty. Iran has not yet answered the international community’s proposal and instead reiterated a position set out at talks in Moscow last June, according to a U.S. official, who spoke on condition of anonymity. The group of world powers is pressing Iran to provide a detailed answer that will enable progress in the negotiations, the U.S. official said.

Enrichment Rights

While receiving formal recognition on enrichment rights isn’t a precondition at the meeting in Almaty, Iran wants to know how those rights will eventually be recognized, said an Iranian official, who spoke on condition of anonymity. Uranium enrichment, the key technical step used to generate nuclear power and build atomic bombs, is at the heart of the decade-long conflict with the international community.

“What we need now is for them to react positively and concretely to our proposal,” European Union foreign affairs spokesman Michael Mann told reporters in Almaty. “We’re not interested in talks for the sake of talks.” EU foreign policy chief Catherine Ashton represents world powers in the talks -- U.S., China, France, Germany, Russia and the U.K.

After a decade-long standoff, where agreement to continue talking has counted as success, both sides remain entrenched. A United Nations investigation, international sanctions and diplomacy have failed to ease concern that Iran is developing atomic-weapons capacity. Iran, with 75 million people and a $484 billion economy, has maintained that its program operates within treaty boundaries and is peaceful.

Slow, Challenging

The diplomatic process will probably be slow and fraught with challenges, said Iranian Deputy Foreign Minister Abbas Araghchi, a member of the country’s nuclear negotiating team. Iran should be rewarded with the lifting of sanctions along the way or it won’t continue on the path, Araghchi said.

“If there is balance between steps to be taken by the two sides, we likely will be able to start a new approach, and this new trend will be long and will require many steps,” he was quoted as saying in an interview with the state-run Mehr news agency. “There are great obstacles” that require “patience and resistance” to overcome, he said.

While a resolution is “highly unlikely,” both sides should step back from “the confrontation cliff,” Ali Vaez, an Iran analyst in Washington for the International Crisis Group, and co-author Karim Sadjadpour wrote in a report published by the Carnegie Endowment for International Peace. The $100 billion cost calculated in the report includes nuclear-infrastructure investments as well as missed oil revenue from sanctions.

Sunk Cost

“It’s partly because of that sunk-cost issue that Iran is not going to mothball nuclear facilities,” said Mark Fitzpatrick, a former U.S. diplomat who runs the International Institute for Strategic Studies’ nuclear disarmament program. “It’s also the political significance and the way it has become a matter of national sovereignty and almost national identity.”

Israel and the U.S. haven’t ruled out the possibility of military strikes to interrupt Iran’s atomic work. Iran, with the world’s fourth-biggest proven oil reserves, has threatened to stop crude shipments through the Strait of Hormuz if attacked.

Oil Peaks

Oil rose to a nine-month high of $119 a barrel on Feb. 8 on concern that tension with Iran would disrupt Middle East oil exports. Prices have subsequently declined as signs of a wider conflict eased. Brent for May settlement on the London-based ICE Futures Europe exchange was at $106.22 a barrel, down 12 cents. It declined 0.7 percent to $106.34 yesterday, the lowest close since Nov. 2.

Iran’s nuclear negotiator, Saeed Jalili, called the last Almaty negotiating round a “turning point” after their Feb. 27 conclusion.

While the world powers refused to waive oil and banking sanctions at the talks, they did offer to lift some restrictions in exchange for Iran suspending some of its most sensitive nuclear work, U.S. officials said.

Russia’s chief negotiator Sergei Ryabkov said in an interview in Almaty during the last talks that the group offered to ease restrictions on Iran’s exports of petrochemical products and some additional items.

Ryabkov warned on March 21 that progress in talks over Iran’s nuclear program isn’t irreversible.

‘Immediate Challenge’

“The focus of the six powers is rightly on halting and reversing the growth in Iran’s stockpile of 20 percent-enriched uranium that would provide the fastest route toward producing the fissile material needed to build a nuclear weapon,” Greg Thielmann, a former U.S. diplomat at the Washington-based Arms Control Association, wrote in an e-mailed reply to questions. “The immediate challenge will be to stabilize what has been a deteriorating situation.”

Uranium isotopes enriched to 20 percent are closer to the grade needed to build weapons. UN inspectors reported Feb. 21 that Iran had produced 280 kilograms (617 pounds) of the material while converting 103 kilograms of the uranium into a metal form rendering it more difficult to turn into a weapon.

“The Iranians are very skeptical,” said Trita Parsi, president of National Iranian-American Council and author of ‘A Single Roll of the Dice: Obama’s Diplomacy with Iran.’ “Even if an agreement can be reached on 20 percent, Iran is not likely to accept unless it has clarity on what the end game is.”

Challenging U.S.

Supreme leader Ayatollah Ali Khamenei marked the Iranian New Year last month by challenging the U.S. to recognize its right to enrich uranium.

“We see the negotiations offer by the U.S. as an American tactic to fool world public opinion,” Khamenei said on March 21. “If the Americans are really inclined to solve Iran’s nuclear matter, it’s easy to do so and they should admit Iran’s rights to enrich uranium.”

The P5+1, which represents the five veto-wielding permanent members of the United Nations Security Council plus Germany, isn’t likely to do that until greater trust has been built between the sides, Fitzpatrick said.

“When you get down to the details they’re very far apart,” Gary Samore, who advised President Barack Obama on nuclear issues until January, said April 1 in Washington. “Even in terms of the quid pro quo for a sort of modest step there’s a long way to go before the two sides could come to an agreement.”

Presidential elections scheduled for June in Iran as well as the Syrian uprising against President Bashar al-Assad, an Iranian ally, will also complicate the round of talks, Samore said.

“To avoid the impression of failure in the negotiating process,” the sides this weekend should at least agree on dates and times for future meetings, Thielmann said.

To contact the reporters on this story: Jonathan Tirone in Almaty at jtirone@bloomberg.net; Indira A.R. Lakshmanan in Almaty at ilakshmanan@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; John Walcott at jwalcott9@bloomberg.net


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