Iran Can't Turn To EU Friend As Nuclear Deadline Nears
October 15, 2003
Dow Jones Newswires
Sally Jones
LONDON -- Iran's trade ties with its largest business partner, the European Union, are in jeopardy as a result of growing international concern over Tehran's nuclear program, according to analysts and sources.
Tehran has until Oct. 31 to prove to its international critics that it isn't building nuclear weapons. The head of the U.N.'s nuclear watchdog is to visit Iran Thursday to persuade the government to meet the deadline.
The E.U. has in recent days toughened its stance toward the country.
E.U. officials have threatened to scrap lucrative new trade terms under negotiation with Iran if Tehran doesn't act immediately and comply with demands by the International Atomic Energy Agency to sign an additional protocol to the nuclear non-proliferation treaty.
"The Europeans have indicated that talks on institutionalization of our economic relations would be extremely difficult to continue if the IAEA matter isn't resolved," said one senior Iranian diplomat.
In a statement released late last month, E.U. foreign ministers called Iran's nuclear program "a matter of grave concern" and said Tehran should sign "without delay" a new accord with the IAEA. The statement said future ties with the E.U. depended on improvement in Iran's record on non-proliferation, human rights, anti-terrorist efforts and the Middle East peace process.
The new trade agreement would pave the way for a more transparent and official framework for European companies to do business openly with Iran. U.S.-imposed sanctions on Iran have forced European firms in recent years to do business with Tehran on an ad-hoc and often erratic basis.
"The E.U. is warning Iran that their economic ties are now at risk," said a London-based consultant.
"It is sending a clear message to Tehran that economics aren't going to do it any good here, without some real assurances that it doesn't have a nuclear weapons program," another European consultant said.
EU Rhetoric May Stall New Energy Deals
Despite the U.S. sanctions, E.U. member countries and Iran have already forged strong economic ties, especially in the energy sector. Several of Europe's largest oil firms have turned their backs on the U.S. policy of isolating Tehran and plowed billions of dollars intolucrative Iranian oil and gas projects.
European industry sources say the latest warning from the E.U. doesn't mean that international oil firms would start pulling out of existing projects in Iran. "That would hardly be feasible," said one industry source.
But they warn that such deals won't be enough to shelter Tehran from any action the international community may decide to take against Iran if the nuclear issue isn't resolved.
They also say that if the E.U.-Iran trade agreement had been signed, a lot of new players - many of whom have been nervous about doing business with Iran - would have been prepared to start signing deals there.
Negotiations already on the table between European energy companies and Iranian oil officials could also be stalled because of the E.U.'s latest warning, sources said.
A consortium of Japanese oil companies recently buckled under U.S. pressure to delay talks with Tehran on signing a deal to develop Iran's giant Azadegan oil field until the nuclear issue has been cleared up.
"This is something which could limit future deals. People are worried about possible military action in Iran even if it were a small deal," said Josh Mandel at London-based consultants Control Risks.
But it is still unclear what action the international community may choose to take if the nuclear issue isn't resolved.
If Tehran goes ahead and signs the additional non-proliferation protocol, U.N. inspectors would have unfettered access to any sites in Iran they see fit.
But Tehran is naturally nervous. It feels that Washington would continue to point the finger at Iran even if suspicions over its nuclear program proved to be unfounded.
Tehran's response to the IAEA's demand has so far been contradictory.
Last week, Iranian President Mohammad Khatami said his government would do everything it could to allay concerns about its nuclear program, but added that inspectors would have to respect the country's "national security."
Khatami's remarks followed cries from the country's hard-liners for Iran to withdraw from the non-proliferation treaty.
The IAEA's board of directors is expected to refer the issue to the U.N. Security Council if they aren't happy with Iran's efforts to comply with its October deadline. The board will next meet in November.
But oil industry sources both in Tehran and Europe don't believe the recent tensions will inadvertently delay the inking of energy deals between oil majors and Iran. "It (Iran) is too important a market," one European industry source said.
A senior Iranian official argued that "it is simply impossible tactically to prevent European companies doing business in Iran." This, he added, "is a relationship which benefits both sides."
If the nuclear issue finds itself in the hands of the U.N. Security Council, international consultants say the E.U. may support some kind of punitive sanctions on Iran but nothing too restrictive. They say the main issue for the international community is still to sort out the reconstruction of Iraq.
"What we may see being put in place is something symbolic on certain things like limiting diplomatic travel," said one London-based political consultant.
-By Sally Jones, Dow Jones Newswires; 44-20-7842-9347;
sally.jones@dowjones.com http://framehosting.dowjonesnews.com/sample/samplestory.asp?StoryID=2003101515520008&Take=1