Tension builds as Iran brings key nuclear plant on line

Tension builds as Iran brings key nuclear plant on line

London (Platts)--10Aug2005

International concerns over Iran's nuclear program built further Wednesday as
Tehran brought its Isfahan uranium conversion plant back on line. Iran's move
to resume uranium conversion brought swift condemnation from the US, which
believes Tehran is trying to build nuclear weapons, a charge Iran denies. 

But despite the heightening tension, it appeared that the European Union,
which persuaded Iran in November to suspend its fuel cycle work while
negotiations continued on a deal that would reward Tehran with trade
incentives, had not yet given up on hopes of a mutually acceptable solution to
the crisis. It also appeared that the US, which had threatened Iran with a
referral to the UN Security Council, was willing to allow diplomacy to try to
end the impasse.

Iran Monday rejected an EU package of proposals aimed at persuading Tehran to
abandon its plans for uranium enrichment. "We urge Iran to give serious
consideration to the EU's proposals," said a spokesman for the US mission to
international organizations in Vienna, quoted by AFP.

The 35-member governing board of the International Atomic Energy Agency, the
UN's nuclear watchdog, began emergency talks Tuesday in Vienna but broke for a
day Wednesday as diplomats met behind closed doors to try to work out a
response to the Iranian move. AFP reported that a draft resolution presented
to the IAEA by the EU urges Tehran to cease all uranium enrichment-related
activities but does not call for Iran to be referred to the Security Council
to face possible sanctions. 

AFP also quoted diplomats saying that Wednesday's meeting of the governing
board had been canceled because non-aligned states, led by Malaysia, had
opposed the draft resolution as it risked causing a backlash from Tehran.
Germany, which along with Britain and France had negotiated the temporary
suspension of Iran's nuclear activity late last year, said Berlin was
encouraged by comments from Iran's new president Mahmood Ahmadinejad Tuesday
expressing interest in continuing talks with the EU and pledging new proposals
once he had formed a government.

The German government was "very concerned" over Iran's rejection of the EU
proposals, said a German government spokesman quoted by AFP, but "hopes Iran
will nevertheless take the path of reason and will now review the EU-3 offer
for negotiations seriously and constructively and return to the so-called
status quo ante." 

Analysts, meanwhile, discounted the likelihood of any international sanctions
that would include an oil embargo being imposed on Iran because of record-high
oil prices which touched $64.60/bbl in New York earlier Wednesday. "I don't
think anyone is in a position right now to make a credible threat of oil
sanctions against Iran," said Julian Lee, senior energy analyst at the Center
for Global Energy Studies in London. "The hard economic facts are that right
now the world can't do without Iranian oil." Iran currently produces around
4-mil b/d of crude and is OPEC's second-biggest producer behind Saudi Arabia.
It is a major supplier of crude to Europe and Asia, but not to the US, which
maintains its own embargo on the country.

For more information, take a trial to Platts Nucleonics Week at
http://nucweek.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.