Lagniappe

 

 

Global Insight: IAEA report
provides only partial Iran acquittal

Middle East Energy Briefing

· IAEA Report Provides Only Partial Iran Acquittal, Continuing Push for Tightened Sanctions

Iran has answered the International Atomic Energy Agency's questions regarding the development and history of the Islamic Republic's nuclear programme, but failed to give the United Nations' nuclear watchdog any confidence in the purely peaceful nature of the scheme.

Global Insight Perspective

Significance The International Atomic Energy Agency (IAEA) report on Iran's nuclear programme, released on Friday (22 February), failed to clarify questions about the weaponisation allegations that have been levelled against the country, although Iran was more open about the history and current stage of the civil parts of the programme.

Implications Iran is continuing to develop its uranium enrichment capacity, in breach of United Nations (UN) sanctions, as well as refusing IAEA full no-warning access to all its facilities and experts. Historical questions have, however, been answered, allowing those opposed to further sanctions something to hold on to.

Outlook The push for further sanctions against Iran will intensify, with those in the UN Security Council able to exert political favours on the sanctions front reluctant. Iran will start to feel the brunt of the sanctions on its economy soon, as economic actors start to adjust to the likely outcome.

On the Fence, but No Whitewash

The report on Iran's nuclear programme, released on Friday (22 February) by the International Atomic Energy Agency (IAEA), was carefully levelled, as its immediate use—by one side or the other—for political and security purposes was unavoidable.

IAEA Secretary-General, Mohammed El Baradei, took pains to amplify Iran's increased co-operation and demonstration of goodwill in providing the IAEA with increased access to certain Iranian nuclear facilities, experts and information, largely answering the United Nations (UN) watchdog's outstanding questions about the history of Iran's nuclear programme and the current extent of the civil parts of the programme. Apart from clarifying through which channels Iran had secured certain nuclear technologies and materials—in general providing the IAEA with a deeper knowledge and understanding of the Pakistani nuclear scientist A. Q. Khan's illicit international smuggling network—the agency said that through this report its knowledge of Iran's current operations was now clearer. Nevertheless, it added a caveat to that chapter, saying that information on these matters was given "on an ad hoc basis and not in a consistent and complete manner".

On the negative side, the IAEA report was very blunt in its statement, saying that Iran's failure to provide any answers to the weaponisation charges gave the agency "no confidence in the exclusively peaceful nature of the programme". It also qualified the allegations levelled against Iran in this field as "a matter of serious concern and critical to an assessment of a possible military dimension to Iran's nuclear programme". IAEA confirmed in the report the by-now-widely-leaked information that Iran is testing a new generation of uranium enrichment centrifuges, the IR-2, with the view of deploying them to speed up enrichment significantly. The agency was also able to confirm that Iran continues to enrich uranium on an increasing scale in breach of current UN resolutions, using its first-generation equipment—a fact Iran has made no effort to deny.

A Security Council Battle

The report crucially failed to put nuclear weaponisation allegations and fears to rest regarding Iran, leaving the UN Security Council (UNSC) having to agree on or dismiss the latest sanctions-tightening package introduced by France and the United Kingdom into the Council last week. The package is the result of negotiations between the pro-sanctions front in the UNSC, including the United States, United Kingdom, and France, together with Russia and China and non-permanent member of the UNSC in the Iran discussion group, Germany. Hence, Russia and China have already agreed to the theoretical proportionality of the tightened sanctions, although they might seize on some of the report's positive aspects in order to insist upon more diplomacy and granting Iran more time to answer the IAEA's questions.

Complicating the process is a rather reluctant group of non-permanent members of the UNSC at the moment, with Libya, Indonesia, South Africa, and Vietnam all having voiced a preference for more negotiations, providing the Islamic Republic with more time, and slowing down the implementation of punitive measures. With such a large group being openly sceptical about the usefulness of further sanctions, the pro-sanctions front in the Council will likely have to engage China and Russia in particular in further negotiations, possibly offering concessions elsewhere in order not to provoke a veto, and secure a large majority for the sanctions within the week.

Iran Enforces Belligerent Reactions in Election Build-Up

Meanwhile official Iranian reactions to the IAEA report seized on the positive notes, claiming it was an exoneration—closing its nuclear dossier at the UNSC—and promoting it as a victory. Iranian newspapers received printed directives from Iran's Supreme National Security Council, an official body close to Supreme Leader Ayatollah Ali Khamenei, advising journalists to write about the IAEA report as a great national success, Los Angeles Times reported. Ayatollah Khamenei's measure led to the large group of conservative parliamentarians critical of President Mahmoud Ahmedinejad to support the government line on the issue, not questioning the president's belligerent rhetoric and unyielding diplomacy on the issue.

It now looks as though the upcoming Iranian parliamentary elections in March might be held against the backdrop of increased international conflict, although the numerous anti-presidential conservative factions' refusal to yield to international pressure on the nuclear issue will have deprived the embattled president of his ability to use his stand in the nuclear conflict as a proof of his nationalistic credentials when compared to his opponents' defeatism and policies of appeasement. Crucially, Iran's security and nuclear policy is the realm of the Supreme Leader, whose authority the anti-presidential conservatives have no willingness to question.

Stinging Sanctions

What rapidly might come to influence the Iranian polity in the build-up to the elections is Iran's deteriorating economy under international sanctions and increasing isolation. While high oil prices have managed to keep the economy largely afloat, spiralling inflation and high energy subsidies and import costs (Iran has to import gasoline (petrol) due to an insufficient refinery capacity) has made the economy vulnerable and international isolation has virtually cut off investment and made imports of many crucial technologies impossible. The growing sanctions over the past years have caused large-scale capital flight from the country, with most of the country's wealth now having been moved abroad. Iran is also suffering a brain drain on a truly disastrous scale, hitting its oil and gas development projects especially hard.

New sanctions will further disrupt trade and reduce even further the dwindling number of international banks that have ties with Iran. As this happens, Iran will find itself increasingly unable to monetise its vast gas reserves through exports, other than continuing to develop some easily accessible fields for domestic use. It will also find itself unable to lift its oil exports to the desired levels, and probably having to accept being powerless even to halt the decline in its mature assets fully, as it will not be able to secure enhanced oil recovery (EOR) techniques. The remainder of the economy will continue to suffer from inertia, as international money transfers have already become so complicated that much of the normal trade has been slowed down crucially, with significantly raised costs.

Outlook and Implications

Negotiations in the UNSC will continue, with the momentum now increasingly in favour of more sanctions as there has not been any desired progress on the crucial enrichment and weaponisation issues.

Iran will continue to voice a belligerent tone against the international community up to and beyond the March elections. This stance will be taken up not only by the pro-Ahmedinejad factions, but also by those that are against his leadership, in order that the president will not to be able to rally support behind him on this issue.

Problematically for the West, there still appears to be broad political unity around Iran's nuclear programme, although there might perhaps be scope for future negotiations about weaponisation elements following the elections. Sanctions will further hit the Iranian economy—which is seen as President Ahmedinejad's Achilles heel, although whether he will be able to deflect the blame for the deterioration onto the international community or not remains hard to ascertain, as it can still hit both ways in the campaign.

Samuel Ciszuk is a Global Insight's Middle East energy analyst. Petroleumworld does not necessarily share these views

Editor's Note: For more information on Global Insigth, contact: Catarina Feria-Walsh Global Insight, catarina.walsh@globalinsight.com. / www.globalinsight.com.
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Petroleumworld News 02/26/08

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