ANALYSIS-Showdown over Iran atom drive looms despite new talks

Mark Heinrich, Reuters:

The talk was polite but the positions as irreconcilable as ever, suggesting that renewed EU-Iran dialogue this week may only have put off an inevitable showdown over Western suspicions Tehran seeks nuclear weapons. READ MORE

In five hours of "exploratory" discussions, Iran insisted on its right to produce enriched uranium, vital for nuclear power plants or bombs, while swearing anew that its goal was solely to fuel an energy-hungry economy.

The European Union, steeled by international alarm over recent Iranian calls for Israel to be destroyed, again demanded Tehran let others purify uranium for it as a precaution against secret attempts to turn it into material suitable for weapons.

Wednesday's reopening of talks and decision to reconvene, probably in late January, halted a slide into confrontation that could see the International Atomic Energy Agency (IAEA) vote to refer Iran to the U.N. Security Council for possible sanctions.

For two years EU powers offered Iran trade incentives if it gave up enrichment work. But they froze talks in August when Iran resumed uranium-ore processing, which it had shelved after U.N. sleuths found an 18-year-old, covert nuclear programme.

So why did the EU reopen talks now without requiring Iran to re-suspend uranium-ore processing?

Analysts said the EU needs more time to gain Russian support for reporting Iran to the Security Council. Moscow is building Iran's first nuclear reactor, a lucrative $1 billion stake, and says there is no evidence of an Iranian atomic bomb programme.

Russia, along with China, has blocked a decisive consensus for referral on the IAEA board. The two could also veto sanctions as permanent members of the Security Council.

"Can the EU3 back up their bark with bite? The Russians are the key. They hold Iran's nuclear cards because they have the fuel (for the Bushehr reactor start-up)," said Joseph Cirincione of the Carnegie Endowment for International Peace think-tank.

"The Europeans are buying time to try to muster Russian cooperation by showing that Iran's stance is irretrievable."

Mark Fitzpatrick of the International Institute for Strategic Studies said the renewed dialogue put off a showdown, but the EU3 knew anyway that it could not gather the requisite broad support until after the Christmas-New Year holiday period.

"In the meantime, Iran is not enriching uranium -- they've publicly committed not to do so as long as they're in dialogue. So the EU feels it loses nothing in talking now," he said.

The EU and United States have little choice but to pursue diplomacy because military action is unpalatable, given the quagmire in neighbouring Iraq and the difficulty of bombing Iran's nuclear installations, some of which are underground.

"DIGGING IN"

While diplomats with "EU3" powers France, Britain and Germany said Wednesday's exchange of views was civil, one called the mood "pretty grim as the Iranians seemed to be digging in".

Iranian delegate Mohammad Mehdi Akhonzadeh said his side urged the EU3 to "act on the proposition that enrichment will be conducted inside" the Islamic republic. Any other option, he said, was "unacceptable" and "an insult" to Iranian sovereignty.

"Both sides have boxed themselves into a corner. I think they were going through the motions. This dialogue may well be the final act of diplomacy before the curtain lowers for a referral vote," said Greenpeace nuclear analyst William Peden.

In September, the IAEA set the stage for a vote by declaring Iran in violation of non-proliferation treaty obligations after failing to prove that its nuclear activity was peaceful.

EU diplomats said the Iranians were warned that to ensure a January meeting they should do nothing related to enrichment work -- namely, development of centrifuge machines that purify uranium hexafluoride gas by spinning at supersonic speeds.

But an intelligence official said Iran was already making centrifuge parts -- something Cirincione called "salami tactics" as Iran knew this did not not technically violate IAEA rules since the devices can also be used for civilian power plants.

The official said Iran's National Security Council and the country's president, Mahmoud Ahmadinejad, who has called the Holocaust a myth and said Israel should be wiped out, were quietly debating the best timing for going public on enrichment.

"They have been encouraged by the success of the move back to uranium-ore conversion," the official told Reuters.

Intelligence sources said last month that Iran was preparing to re-launch enrichment at its underground Natanz plant.

That would scupper a Russian offer to defuse the stalemate by allowing Tehran to establish a civilian nuclear energy programme but transferring enrichment to Russia under a joint venture.

Iran again dismissed that compromise plan at the talks, an EU diplomat said, indicating the idea was all but dead.

Many analysts and some Western diplomats believe Iran's overall strategy is to win a psychological war with the West.

Tehran may be counting on Russian trade solidarity, resentment of developing nations at big-power hoarding of nuclear energy sources, and fear in industrialised states that sanctions could disrupt energy imports from OPEC giant Iran. (Additional reporting by Jon Boyle in Paris, Madeline Chambers in London, Parisa Hafezi in Tehran)