Select Committee on Foreign Affairs Minutes of Evidence

Memorandum submitted by the Foreign and Commonwealth Office

I.  INTRODUCTION

  1.  The Terms of Reference given by the Select Committee on Foreign Affairs (FAC) for this Inquiry on Global Security: Iran are as follows:

—  the extent of the progress Iran has made on nuclear development;

—  the relationship between Iran's domestic political and human rights situation, and its nuclear ambitions;

—  the relationship between Iran's regional and international security situation and its nuclear ambitions;

—  the regional and global security implications of Iran's nuclear programme;

—  the history of international engagement with Iran over nuclear non-proliferation, in particular the role of the United Kingdom, the European Union, the United States, Russia and the United Nations; and

—  the options open to the international community in addressing the possibility of Iran obtaining nuclear weapons, and the implications of these options for regional and global security, nuclear proliferation and energy security.

  2.  This Memorandum reflects the context set by the above terms of reference of the inquiry, focusing particularly on Iran as required by the FAC. This is not a full reflection of British Government policies in the region, where the relationship with other countries is of major importance to key British interests.

  3.  Iran has been high on the political agenda for some years. The United Kingdom and its international partners have been concerned about Iranian activities across a range of issues: human rights, its attitude towards terrorism, its activities in Lebanon and the Occupied Palestinian Territories, the motivation for its long-concealed nuclear programme and, more recently, its activities in Iraq and Afghanistan. The breadth of this concern is reflected in the consistent international approach adopted, in particular in the EU, the UN and the G8.

  4.  The Committee will visit Tehran. United Kingdom diplomatic relations with Iran have been cut off and restored several times since the 1979 Revolution. Iran's relations with most countries improved following the reformist President Khatami's election 1997. UK-Iran relations were fully restored after Iran gave assurances in 1998 that it had no intention to threaten the life of Salman Rushdie. The UK and Iran exchanged Ambassadors in 1999.

  5.  UK policy towards Iran, like that of the EU, is one of "constructive but critical engagement". This dual track policy involves clear incentives for Iran to prosper by restoring international trust in respect of their nuclear programme, and sanctions to be imposed if they fail to address international concerns. We aim to encourage Iran to play a more constructive international and regional role, and support reforms within Iran including through bilateral and multilateral dialogue on issues of concern. These issues include human rights and fundamental freedoms, Iran's nuclear programme, Iran's support for terrorism and for groups seeking to undermine the Middle East Peace Process and other regional issues. The UK and Iran have had some co-operation in the fight against the drugs trade in the region and assistance for the large number of refugees from Iraq and Afghanistan.

  6.  EU Foreign Ministers agreed to the negotiation of a Trade and Co-operation Agreement (TCA) between Iran and the EU in June 2002. Negotiations were suspended in June 2003 due to EU concern over Iran's nuclear programme. In light of the International Atomic Energy Agency's resolution on 24 September 2005, finding Iran non-compliant with its safeguards agreements, there are no plans at the moment for further negotiating in the TCA or parallel negotiations on a Political Agreement. These negotiations confirmed the EU's readiness to explore ways to further develop political and economic co-operation with Iran, following action by Iran to also address the concerns of the EU.

  7.  Iran-US relations have not been restored since they were broken off in 1980, when strict bilateral sanctions were imposed. These sanctions have also affected foreign companies doing business with Iran by threatening any assets or interests they may have under US jurisdiction. The meeting between Ambassadors Crocker and Kazemi-Qomi in Baghdad on 28 May was the first official meeting between the US and Iranian governments since 1980.

  8.  Public exposure by the National Council of Resistance of Iran (NCRI) opposition group in August 2002 of previously undeclared Iranian nuclear activity brought the nuclear issue to public prominence. The "E3" (the United Kingdom, France and Germany) began to work together in summer 2003 to try to help Iran rebuild international confidence in its nuclear intentions following the uncovering of a series of breaches by Iran of its nuclear safeguards obligations under the NPT. In gradually expanding formats ("E3/EU" "with the support of the High Representative of the European Union" and "E3+3", adding China, Russia and the United States), this group has remained at the centre of developing the international response to Iran's nuclear programme over the last four years.

II.  IRANIAN PROGRESS ON NUCLEAR DEVELOPMENT

  9.  Iran has pursued a wide range of nuclear activities, including the mining and milling of uranium, the conversion of uranium, the enrichment of uranium, fuel fabrication, reactor construction, and reprocessing R&D. Its progress in these areas has been uneven and in some areas is not entirely clear. Iran has publicly said that it is developing these nuclear capabilities only for legitimate peaceful purposes. But serious concerns have arisen about these activities for a number of reasons: Iran has in the past concealed many aspects of its nuclear activities (with resultant breaches of its obligation to comply with the provisions of its Safeguards Agreement); Iran failed for years to respond substantively to IAEA questions regarding a number of outstanding issues on its past nuclear activities, and although it has recently agreed an action plan with the IAEA, which consists of a timetable to address these issues one by one, the key will be implementation of the agreement; Iran is not currently implementing an Additional Protocol nor some additional transparency measures which the IAEA has said are essential to clarify certain aspects of the scope and nature of its nuclear programmes; and the IAEA has therefore not been able as yet to provide assurances about the absence of undeclared nuclear material and activities in Iran or about the exclusively peaceful nature of the programme. In addition, there are also concerns in the international community that the main focus of Iran's programme seems to be, not on constructing power reactors, but on technologies that could be used to make fissile material for nuclear weapons (notably enrichment-related and heavy water reactor technology).

Uranium Mining and Milling

  10.  In February 2003 then President Khatami announced that Iran was developing a uranium mine at Saghand to produce uranium ore and an ore concentration plant (mill) at Ardekan to concentrate the ore into yellowcake (the feed material for conversion plants, also known as uranium ore concentrate, UOC). In its Additional Protocol declarations of 21 May 2004, Iran provided information on these facilities and also on a mine and ore concentration plant at Gchine (near Bandar Abbas). Under the provisions of the Additional Protocol the Agency subsequently carried out complementary access visits to Gchine in July 2004 and to Saghand and Ardekan in October 2004.

  11.  According to the Agency's November 2004 report, at Saghand low grade hard rock ore bodies would be exploited through conventional underground mining techniques. The infrastructure and shaft sinking were essentially complete, tunnelling towards the ore bodies had started, and ore production was forecast to start at the end of 2006. This ore was to be processed at the Ardekan mill, but that was at an early stage of development, though the installation of the infrastructure and processing buildings had started. The estimated production design capacity of the Saghand mines was forecast as 50 tonnes of uranium per year and the design capacity of the mill corresponded to that of the mine. However, with Iran ceasing to implement its Additional Protocol on 5 February 2006, the IAEA can no longer carry out complementary access visits to Saghand or Ardekan, and the status of activities there is consequently now unclear.

  12.  According to the Agency's November 2004 report, construction of the Gchine open-pit mine and an associated mill had, in contrast, already been completed by then. Indeed, Iran stated that, as of July 2004, mining operations had started and the mill had been hot tested, during which testing a quantity of about 40 to 50 kg of yellowcake was produced. The estimated design capacity was 21 tonnes of uranium per year. The IAEA has made clear that it has a number of questions about past activities at the Gchine mine and mill to which Iran has not yet provided satisfactory answers. With Iran ceasing to implement its Additional Protocol on 5 February 2006, the IAEA can no longer carry out complementary access visits to the Gchine mine and mill, so the status of current activities there is also now unclear.

  13.  The Agency has also reported that Iran has explored two other uranium production routes. One was the extraction of uranium from phosphoric acid. Using research scale equipment, small quantities of yellowcake were successfully produced at the Tehran Nuclear Research Centre (TNRC) laboratories. Iran has stated that there are no facilities in Iran for separating uranium from phosphoric acid other than the research facilities at TNRC. The second route explored by Iran was the production of yellowcake using percolation leaching. Using this technique, Iran produced an estimated several hundred kilogrammes of yellowcake using temporary facilities, now dismantled, located at the Gchine mining site.

  14.  Therefore, while Iran is clearly pursuing a capability to mine and mill uranium ore, it remains unclear how far it has got in actually operationalising such a capability.

Uranium Conversion

  15.  Iran has carried out a variety of uranium conversion experiments and has also built and is now operating a large uranium conversion facility (UCF) at Esfahan.

Uranium Conversion Experiments

  16.  In February 2003, having been confronted by information the Agency had received from another member state, Iran acknowledged that in 1991 it had imported natural uranium, in a variety of forms, which it had not previously reported to the Agency, and that it had used some of those materials, at locations which had not previously been reported to the Agency, for testing certain parts of the UCF conversion process (ie, uranium dissolution, purification using pulse columns, and the production of uranium metal). Iran repeatedly stated, however, that it had not carried out any research and development or testing, even on a laboratory scale, of the more complex processes using nuclear materials (eg, the conversion of uranium dioxide, UO2, to uranium tetrafluoride, UF4, and the conversion of UF4 to uranium hexafluoride, UF6).

  17.  Following the discovery by the Agency of indications of depleted UF6 samples of waste taken at the Jabr ibn Hayan Multipurpose Laboratories (JHL) at TNRC, Iran subsequently acknowledged in August 2003 that it had in fact carried out UF4 conversion experiments on a laboratory scale during the 1990s at the Radiochemistry Laboratories of TNRC using depleted uranium. In October 2003 Iran further acknowledged that, contrary to previous statements, practically all the materials important to uranium conversion had been produced in laboratory and bench-scale experiments (in kilogram quantities) carried out at TNRC and ENTC between 1981 and 1993 without having been reported to the Agency.

  18.  In a September 2004 report the IAEA provided a detailed account of its understanding of all these past and previously undeclared conversion experiments. It made clear that there were inherent difficulties with investigating activities that ended over a decade ago, and that it was not possible to verify in detail the chronologies and descriptions of the experiments which took place in Iran. It later added that a precise nuclear material accounting was also not possible, but nevertheless concluded that Iran's statements and declarations regarding the technical scope of its work, the equipment used and the amounts of nuclear material consumed and produced were consistent with what was ascertained by the Agency as a result of its investigations.

Uranium Conversion Facility

  19.  Iran originally sought to have a UCF built by a foreign supplier under a turn-key contract, but the contract was cancelled in 1997. Iran subsequently proceeded to start construction of the UCF itself at Esfahan, basing its design on documentation obtained from the supplier but modifying it in two instances. The IAEA received preliminary design information on the UCF in July 2000 and updated design information in April 2003.

  20.  According to this information the facility now appears to be designed to have separate process lines for:

—  the conversion of natural UOC into natural UF6 (200 tonnes of natural UF6 annually);

—  the conversion of low-enriched UF6 into low enriched UO2 (30 tonnes per year of UO2 enriched to 5% U-235);

—  the conversion of low-enriched UF6 into low enriched uranium metal (30kg per year of uranium metal enriched to 19.7% U-235);

—  the conversion of depleted UF6 to depleted UF4 (170 tonnes per year of depleted UF4);

—  the conversion of natural UOC to natural uranium metal;

—  conversion of natural UOC to natural uranium UO2.

  21.  So far Iran appears to have concentrated on constructing and operating the first of these process lines, which is designed to produce the feed material for the gas centrifuge facilities Iran is also constructing. This line involves the conversion of UOC into AUC (ammonium uranyl carbonate), the conversion of the AUC into UF4, and the conversion of the UF4 into UF6. Iran began testing these processes at the UCF in May/June 2004, producing about 30-35 kg of UF6 in consequence. Since then it has conducted four production campaigns at the UCF—from August 2004 to November 2004/February 2005, from August 2005 to November 2005, from November 2005 to April 2006, and from June 2006 to early 2007. The Agency reported in May 2007 that during the annual physical inventory verification at the UCF in March 2007 Iran presented 269 tonnes of UF6 for Agency verification.

  22.  While this is a significant achievement by Iran, some uncertainties remain:

—  about the long term source of the yellowcake for the UCF (so far Iran appears to have been drawing down declared stocks of previously imported South African yellowcake to feed the UCF, but UN sanctions now prohibit future exports of yellowcake to Iran and it is unclear if the mine and mill complexes at Gchine and Saghand/Ardekan can provide sufficient feed for the UCF by the time the existing imported stocks of yellowcake are exhausted);

—  about the quality of the UF6 produced by the UCF;

—  about the status of the other five process lines at the UCF and in some cases about their purpose (the second and fourth processes are consistent with dealing with the enriched and depleted streams of uranium emerging from gas centrifuge plants designed to produce 5% enriched UF6 for Bushehr type reactors, and the sixth process is consistent with producing natural uranium dioxide fuel for the HWRR Iran has under construction, but it is less clear why Iran would wish to convert 19.7% enriched UF6 into 19.7% enriched uranium metal or to convert UOC into natural uranium metal).

Uranium Enrichment

Gas Centrifuge Enrichment

  23.  At a news conference on 14 August 2002 an organisation known as the National Council of Resistance of Iran announced that there was a large underground nuclear facility at Natanz. The then Iranian President, Khatami, announced in a speech on 9 February 2003 that this was an enrichment facility, and later that month Iran formally declared to the IAEA that it had plans to complete at Natanz a Pilot Fuel Enrichment Plant (PFEP) of approximately 1,000 centrifuge machines and a Fuel Enrichment Plant (FEP) of over 50,000 centrifuge machines.

  24.  Iran originally told the Agency in February 2003 that the design and development work for its Natanz facility had started in 1997 and been based on information from open sources and extensive modelling and simulation. In contrast with this earlier information they had provided, in August 2003 AEOI officials described the centrifuge programme as having consisted of three phases: from 1985-97 activities had been located mainly at the AEOI premises in Tehran; during the second phase, from 1997-2002, activities had been concentrated at the Kalaye Electric Company workshop in Tehran; and during the third phase, from 2002 till then, at Natanz.

  25.  Iran continued to maintain, however, that it had not used any nuclear materials in the R&D programme and that its enrichment programme was indigenous. But it subsequently admitted in October 2003 that it had carried out some testing of centrifuges at the Kalaye Electric Company workshop using UF6 imported in 1991. In November 2003 it also admitted that it had enriched uranium to 1.2% at the Kalaye Electric site. It has also transpired since then that Iran received considerable assistance through foreign intermediaries from a foreign procurement network—in the form of two deals in 1987 and the mid-1990s concerning centrifuge designs and components. The precise extent of the assistance given remains one of the issues about which the IAEA is still keen to learn more, but it clearly involved P-1 and P-2 centrifuge technology[1].

  26.  Whatever the precise details of the history, by 2003 Iran was installing P-1 centrifuges into the above-ground PFEP at Natanz. Despite a request from the IAEA Board not to do so, on 25 June 2003 Iran introduced UF6 into a single centrifuge machine at the PFEP and on 19 August 2003 began testing a small 10-machine cascade there with UF6. As of October 2003 the first of six planned 164 machine cascades was being finalised there. Then on 12 November 2003 Iran implemented a decision to suspend the installation, operation and testing of centrifuges at Natanz with or without nuclear material.

  27.  This suspension remained in place until 11 February 2006 when Iran began resuming enrichment tests at the PFEP by feeding a single machine with UF6 gas. Since then Iran has installed at the PFEP some single machines, a 10 machine cascade, a 20 machine cascade and two 164 machine cascades. Successive IAEA reports suggest that for much of the time these machines have been running under vacuum, with UF6 only being fed into the machines intermittently. In February 2006 Iran also indicated to the IAEA that it planned to commence installation of the first 3000 P-1 machines at the FEP in the fourth quarter of 2006 (18 cascades of 164 machines). By 13 May 2007 eight 164 machine cascades were operating simultaneously and being fed with UF6, while two other similar cascades had been vacuum tested and three more were under construction.

  28.  Partly because of the intermittent operation of centrifuges at the PFEP and partly because further information is still needed about the performance of the centrifuges in the FEP, it remains unclear how far Iran has really mastered P-1 centrifuge technology to date. Another area of uncertainty concerns the extent of Iran's work on the P-2 centrifuge and variants of it. There are also important uncertainties about Iran's capabilities in relation to the manufacture and assembly of centrifuges (an area into which the IAEA had some insight until early 2006 when Iran ceased to implement Additional Protocol measures).

Laser Enrichment

  29.  In addition to these past and present gas centrifuge enrichment activities, it is now known that Iran had a laser enrichment programme.

  30.  After initially denying it had such a programme at all, in October 2003 Iran acknowledged that, starting in the 1970s, it had had contacts with foreign entities from four countries related to atomic vapour laser isotope separation (AVLIS) and molecular laser isotope separation (MLIS) techniques. In particular, in the 1990s a laser spectroscopy laboratory (LSL) and a comprehensive separation laboratory (CSL) were imported to TNRC. This undeclared equipment was initially said to be able to enrich previously undeclared imported natural uranium metal up to the contracted level of 3%, and even slightly beyond. But the Iranians subsequently told the IAEA that the average laser enrichment level achieved by the CSL in the 1990s was in fact 8% to 9%, with some samples of up to approximately 15%. The equipment was used up to October 2002 when both laboratories, and the nuclear material, were moved from TNRC to Lashkar Ab'ad.

  31.  At Lashkar Ab'ad an undeclared pilot plant for laser enrichment using AVLIS techniques had been established in 2000, but the export of the copper vapour lasers (CVLs) for this pilot plant was prevented by the supplier country. It was for this reason that the LSL and CSL were moved to Lashkar Ab'ad from TNRC in October 2002. After that, taking advantage of the CVLs and dye lasers from these laboratories and of the large vacuum chamber and associated equipment imported in 2000 and already located at Lashkar Ab'ad, experiments were conducted from October 2002 and January 2003 using more of the previously undeclared natural uranium metal that had been imported earlier. Then, according to the Iranians, in May 2003 all the equipment that was at Lashkar Ab'ad was dismantled and transferred to the AEOI's facility at Karaj for storage together with the uranium metal.

  32.  The equipment and the metal were presented to the IAEA at Karaj in October 2003. In November 2004 the IAEA reported that it had completed its review of Iran's AVLIS programme and concluded that Iran's descriptions of the levels of enrichment achieved using AVLIS at the TNRC CSL and at Lashkar Ab'ad, and the amounts of material used in its past activities, were consistent with information available to the Agency to date. It noted that Iran had presented all declared key equipment, which had been verified by the Agency, and that, if, as Iran stated, the evaporated uranium and some collectors were discarded as waste, mainly at the Qom disposal site, recovery of the small quantities of nuclear material involved would not be feasible. The Agency noted that Iran had also stated that it currently had no plans to resume the enrichment of uranium using laser isotope separation.

Fuel Fabrication

Fuel Fabrication Laboratory

  33.  In 1985 Iran brought into operation a Fuel Fabrication Laboratory (FFL) at Esfahan, about which it told the Agency in 1993 and for which design information was provided to the Agency in 1998. The Agency reported in November 2004 that it was still in operation and is suitable for producing, on a small scale, fuel pellets.

Fuel Manufacture Plant

  34.  In May 2003 Iran informed the Agency of its plans to commence in 2003 the construction of a Fuel Manufacture Plant (FMP), and in November 2003 it submitted preliminary design information for the FMP stating that the plant capacity would be 30 tonnes UO2 per year. In August 2004 Iran submitted updated design information which reflected an increase in plant capacity to 40 tonnes UO2 per year, declared to be sufficient to accommodate the fuel needs for the Bushehr Nuclear Power Plant (about 25 tonnes UO2 per year, with a maximum enrichment of 5% U-235) and the 40MW Heavy Water Research Reactor (about 10 tonnes per year). Iran said the FMP was to be constructed at Esfahan and was scheduled to be commissioned in 2007.

  35.  In its September 2005 report the IAEA noted that construction of the FMP had started in 2004. In November 2005 it reported that as of a design information verification carried out in October 2005 the civil engineering construction of the plant was ongoing. After a further design inspection verification in July 2006 the IAEA reported in August 2006 that the civil engineering construction of the facility was approximately 80% completed and that equipment was being installed. It also noted that Iran informed the inspectors that full commissioning of the FMP was scheduled for 2007.

  36.  The Agency has recently reported that on 29 April 2007 Iran informed it that the FMP would receive natural uranium oxide powder soon in preparation for preliminary process tests.

Reactors

Existing Research Reactors

  37.  Iran already has a number of research reactors and critical assemblies, of which the most important is the Tehran Research Reactor (TRR) at TNRC. This was supplied by the United States in the 1960s and is still operational today. It could not generate a significant quantity of plutonium but Iran has admitted that the very small quantities of plutonium it has already separated (see below) came from irradiating uranium targets in the TRR.

Bushehr Nuclear Power Plant

  38.  In 1976 the Shah contracted with a German company to build two nuclear power reactors at Bushehr. Before even the first was completed the Iranian Revolution of 1979 overthrew the Shah and led to the creation of the Islamic Republic. For many years construction was halted. But after the Iran/Iraq War the Russians agreed in 1995 to fit one of their VVER-1000 power reactors into the original reactor building. This reactor, Bushehr Nuclear Power Plant 1 (BNPP-1), is now nearing completion. The Russians have secured a contract with Iran to supply the first ten years worth of fresh fuel for the reactor and are willing to supply fuel for its lifetime, but delivery of the first load of fresh fuel has yet to take place.

Heavy Water Research Reactor

  39.  In May 2003 Iran informed the Agency of its plans to construct a Heavy Water Research Reactor at Arak (the 40MW Iran Nuclear Research Reactor, IR-40). The stated purposes of the reactor are reactor research and development, radioisotope production, and training. But it would also be eminently suitable for producing weapons-grade plutonium.

  40.  The Agency reported that as of July 2004 construction had not begun, but in March 2005 the Agency reported that Iranians officials had indicated that the project was progressing and later that month inspectors visiting the site confirmed that construction had started. In November 2005, February 2006, April 2006, July and August 2006, and in February 2007 the Agency carried out design information verification at the site and on each occasion confirmed that construction was ongoing.

  41.  On 29 March 2007, however, Iran informed the Agency that it had suspended the implementation of the amended Code 3.1 to its Subsidiary Arrangements which it had accepted in February 2004 (and which requires the submission of design information for new facilities as soon as a decision to construct, authorise or modify a facility is taken is taken). Iran stated that it would instead revert to the implementation of the original 1976 version of Code 3.1 (which only requires the submission of design information for new facilities no later than 180 days before the facility is scheduled to receive nuclear material for the first time).

  42.  In the light of this decision Iran has taken issue with the Agency's right to continue to verify design information concerning the IR-40 reactor at Arak which Iran originally provided pursuant to the amended Code 3.1. The Agency, by contrast, has asserted that it has a continuing right to verify design information provided to it and that this right is not dependent on the stage of construction of, or the presence of nuclear material at, a facility. While this is not yet resolved, Iran did allow IAEA inspectors to visit the HWRR in late July 2007.

Heavy Water Production Plant

  43.  The HWRR will need heavy water and to provide this Iran has already constructed a Heavy Water Production Plant (HWPP) at Arak. The existence of a large facility at this site was publicised by the National Council of Resistance of Iran in August 2002 and Iran confirmed it was an HWPP in February 2003. No information was provided at that time on the intended use of the heavy water, though Iran did point to the possibility of exporting heavy water. Subsequently, in May 2003, Iran informed the Agency about its plans to construct a HWRR.

  44.  Heavy Water Production Plants are not subject to safeguards under a Comprehensive Safeguards Agreement, but they do have to be declared and can be subject to complementary access under the provisions of the Additional Protocol. After Iran signed an Additional Protocol and agreed to implement it provisionally until it was ratified, the Agency made a complementary access visit to the HWPP in March 2005 and reported in June 2005 that it was then being commissioned.

  45.  Iran failed, however, to ratify its Additional Protocol and ceased to implement it provisionally on 5 February 2006. Since then the IAEA has not been able to conduct complementary access at the HWPP. But in its February 2007 and May 2007 reports the Agency has reported that satellite imagery indicates that operation of the HWPP is continuing.

Reprocessing

Past Activities

  46.  In October 2003 Iran acknowledged the irradiation of depleted UO2 targets at the TRR and subsequent plutonium separation experiments between 1988 and 1992 in a hot cell facility in the Nuclear Safety Building at TNRC. Neither the activities nor the separated plutonium had been reported to the Agency previously, as they should have been. Considerable discussion with Iran since then has revealed continued plutonium purification work until 1998 and that the amounts involved (though still very small) were larger than Iran initially suggested, as were the number of depleted UO2 targets irradiated. In January 2007 the Agency was still reminding Iran of outstanding inconsistencies relating to its plutonium experiments and indicating that, unless additional information was provided by Iran, this issue could not be resolved satisfactorily.

Current Monitoring of Hot Cells

  47.  In addition to investigating past plutonium experiments, the Agency has been monitoring the hot cells that exist at TNRC or are under construction at Arak and which could be used to separate plutonium from fission products (reprocessing).

  48.  In its August 2006 report the IAEA mentioned that it had been monitoring the use of hot cells at the TRR and at the Molybdenum, Iodine and Xenon Radioisotope Production Facility (the MIX Facility) through inspections, design information verification, and satellite imagery. It repeated this statement in its November 2006, February 2007 and May 2007 reports, noting on each occasion that there were no indications of ongoing reprocessing activities at those facilities.

  49.  When the Agency was presented by the Iranians with an updated design information questionnaire for the HWRR in August 2003 it did not contain any references to associated hot cells, contrary to what would be expected given that radioisotope production was a stated purpose of the facility. Subsequent reports suggested that Iran did in fact have plans to build associated hot cells and in its August 2006, November 2006 and February 2007 reports the Agency indicated that it had been monitoring the construction of hot cells at the HWRR through inspections, DIV and satellite imagery. In its May 2007 report, however, the Agency noted that follow-up on the construction of hot cells at the HWRR is now limited to the analysis of satellite imagery as Iran decided in April not to provide the Agency with further access to the reactor site to carry out design information verification, following its reversion to the original 1976 version of Code 3.1.

  50.  As explained in the Heavy Water Research Reactor section above, Iran nevertheless allowed further IAEA access to the HWRR site in July 2007, though we await the next report of the Director General to the Board for further details, including the extent of access to the hot cells under construction there. None of the hot cell facilities declared by Iran to date would be physically large enough to handle spent nuclear fuel from the Bushehr reactor.

Other Activities

Polonium

  51.  In September 2003 the Agency noticed from TRR operating records that bismuth metal samples had been irradiated during the same general period as reprocessing experiments had been carried out. Although bismuth is not a nuclear material requiring declaration under a Comprehensive Safeguards Agreement, the irradiation of bismuth is of interest to the Agency as it produces polonium-210, an intensely radioactive alpha-emitting radioisotope that can be used not only for certain civilian applications (such as radioisotope thermoelectric generators (RTGs), in effect nuclear batteries), but also, in conjunction with beryllium, for military purposes (specifically, as a neutron initiator in some designs of nuclear weapons). After discussion with Iranian officials about this irradiation of bismuth the Agency stated in November 2004 that, while it did not have any concrete information that was contrary to the statements made by Iran, it remained somewhat uncertain regarding the plausibility of the stated purpose of the experiments given the very limited applications of short-lived polonium-210 sources.

Lavizan

  52.  Lavizan, or properly Lavizan-Shian, is a site in Tehran that used to house the Physics Research Centre but was razed to the ground in late 2003/early 2004. There are a number of issues connected with it that have been raised by the IAEA—its history and razing, the whole body counters present at it, and why the Centre was procuring a range of dual use items that look as if they could have been of use in uranium conversion and enrichment activities. In its investigations into the procurement efforts made by the Physics Research Centre (PHRC) to acquire dual use material and equipment the Agency was shown equipment on which a small number of particles of natural and high enriched uranium were detected.

Uranium Metal

  53.  In October and November 2005 the IAEA held a number of meetings with Iran, in which further documentation said to have been provided to Iran by the foreign procurement network was made available to the Agency. Among the documents, which related to the 1987 offer, was one related to the requirements for the reduction of UF6 to metal in small quantities, and on the casting and machining of enriched, natural and depleted uranium into hemispherical forms. In its February 2006 report the Agency characterised this document as "related to the fabrication of nuclear weapons components". The Agency noted that, according to Iran, the document was provided on the initiative of the network and not at the request of the AEOI, but to further its investigations the Agency has been seeking a copy of the document.

Green Salt, Tests Related to High Explosives, and the Design of Missile Re-entry Vehicle

  54.  On 5 December 2005 the Agency requested a meeting with Iran to discuss information available to the Secretariat about alleged studies, known as the Green Salt Project, concerning the conversion of uranium dioxide into UF4 (often referred to as "green salt"), as well as tests related to high explosives and the design of a missile re-entry vehicle, all of which could involve nuclear material and which appear to have administrative interconnections. The Agency is still seeking Iranian cooperation on these matters.

III.  RELATIONSHIP BETWEEN IRAN'S DOMESTIC POLITICAL AND HUMAN RIGHTS SITUATION, AND ITS NUCLEAR AMBITIONS

  55.  Human rights remain a central part of our policy approach towards Iran. We have consistently said that our relationship with Iran can only progress if Iran takes action to address all our main areas of concern including respect for human rights and fundamental freedoms. Some activists have argued that the focus on the nuclear issue has led us to neglect the human rights agenda. This has not been our policy, which is why we have maintained public and private pressure on the Iranians over HR abuses. Both subjects are important for us. And, as leading HR activists such as Shirin Ebadi argue, real improvements in the human rights and civil society field would help make Iran become a truly democratic country, that respected the freedoms of its citizens, and would, we believe, become a responsible and constructive actor on the international stage, and one which would fulfil its international obligations.

  56.  In public at least, Iranian leaders and government officials often claim that the concern about human rights abuses shown by the UK, EU and western countries is not genuine, but rather an attempt to divert attention from these countries' own records, or part of a strategy to topple the Islamic Republic. The Supreme Leader, and senior officials have on a number of occasions linked international criticism of Iran's nuclear programme with international criticism of its human rights record, saying that were Iran to make concessions on the former, it would only invite increased pressure on the latter.

Death penalty

  57.  Iran executed more people in 2005 and 2006 than any other country in the world except China (whose population is over 15 times the size). Iran does not issue official figures and reliable data is hard to come by. But, against a world-wide decreasing trend in the use of the death penalty, Amnesty International estimates that at least 94 people were executed in Iran in 2005, and 177 in 2006. Numbers look set to grow again in 2007, as, at time of writing, over 150 people have been executed already this year.

  58.  The UK has repeatedly called on Iran to abolish the death penalty. In particular we object to the Iranian authorities' failure to respect even the most basic of minimum standards regarding the application of capital punishment. Many death sentences are carried out in public. We have doubts as to whether all death sentences are the result of a fair trial and whether everyone who is sentenced to death in Iran is able to exhaust all avenues of appeal available to them. The hanging of two youths aged 17 and 20 in Khorrambad (Lorestan province) on 13 May 2006 occurred barely a month after their alleged crime.

Juvenile executions

  59.  Iran is one of the few countries in the world that still imposes the death sentence for crimes committed before the age of 18. It was one of only two countries in the world known to have executed child offenders in 2006. Reports suggest that between five and eight juvenile executions took place in 2005—more than in any recent year—at least two in 2006, and two so far in 2007. According to Amnesty International, over 60 juvenile offenders (under the age of 18 when their crimes were committed) remain on death row in Iran.

  60.  This is contrary to Iran's international commitments under the International Covenant on Civil and Political Rights (ICCPR) and the Convention on the Rights of the Child (CRC). The executions also run contrary to Iranian assurances that a moratorium is in place on capital punishments against minors, including the Iranian declaration to the UN Committee on the Rights of the Child in January 2005.

  61.  In January 2007, the UN Special Rapporteur on Extrajudicial, Summary or Arbitrary Executions criticised Iran over the continued use of the juvenile death penalty in clear violation of its international obligations: "Between August 2004 and March 2006 I sent 12 communications, involving nine boys and six girls who had been sentenced to death in Iran for crimes committed when they were under 18 . . . The information received is clearly credible and there is every reason to believe that the Iranian judiciary is freely ignoring the prohibition on the juvenile death penalty."

  62.  The UK remains committed to supporting EU action to highlight Iranian death penalty cases that fall short of EU minimum standards (including death sentences handed down for crimes committed before the age of 18). The EU has raised concerns about six juvenile execution cases already this year.

Cruel and inhuman punishment

  63.  Our concerns about criminal justice in Iran are not limited to the death penalty. Cruel and inhuman punishments (floggings, stoning, amputations) remain on the statute books. It is unclear how frequently such sentences are carried out. However, we have received two reports of public amputations for robbery in the province of Kermanshah in February and May 2007. These are the first confirmed cases of amputation in recent years and contravene the commitment Iran made to the EU in March 2003 to implement a moratorium on amputations. The EU has lobbied the Iranian authorities on these sentences.

  64.  The Iranian Judiciary confirmed that a man was stoned to death for adultery in Qazvin province on 5 July this year. Stoning sentences are still handed down by judges, but this was the first confirmed report of an execution by stoning since Iran announced a moratorium on stoning in 2002. The EU Presidency issued an immediate statement condemning the sentence and calling on Iran to respect its international and human rights commitments, and Dr Howells (Minister with responsibility for our relations with Iran) called in the Iranian Ambassador to protest. HMG and EU partners continue to lobby on a case-by-case basis, and press Iran to introduce these moratoria into law.

Judicial system

  65.  Officials in the Iranian judiciary have recognised that elements of the judicial system are in need of urgent reform and have admitted that torture still occurs in the course of criminal investigations. We have received numerous reports of prisoners being subjected to prolonged solitary confinement or being denied medical care.

  66.  Some court hearings are held behind closed doors, and there have been cases where the Iranian authorities have sought to intimidate lawyers who defend political activists and human rights defenders by detaining the lawyers themselves—such as the case of Abdolfattah Soltani, a lawyer defending prominent journalist Akbar Ganji, who was arrested in July 2005, held in solitary confinement, charged with espionage and denied access to legal counsel. He was disbarred and sentenced to imprisonment, before being cleared of all charges in May 2007. Other lawyers in similar situations have been threatened with disbarment.

Freedom of expression

  67.  We also have serious concerns about freedom of expression in Iran. The government has targeted a range of actors from the media and NGOs to students, internet users and trade unionists.

  68.  In 2005 Reporters Sans Frontiers described Iran as "the biggest prison for journalists in the Middle East". In 2006, the authorities continued to close newspapers and arrest journalists on charges such as "insulting officials" and "acting against national security". The head of the Journalists' Association and former member of the Majlis (parliament), Ali Mazrui, was sentenced to a year's imprisonment after being convicted of "slander and the publication of falsehoods with the intention of causing public anxiety". Reformist journalist Ali Farahbakhsh was arrested in November 2006 after attending a conference in Thailand, and has since been sentenced to three years' imprisonment for espionage.

  69.  Iran maintains a state monopoly over TV and radio, which serves to censor the reporting and views to which the Iranian people are exposed. In December 2005 the launch of Iran's first privately-owned TV channel, Saba, was blocked. There are widespread reports that the government issues orders to Iran's news agencies to restrict the coverage of politically sensitive stories, such as the detention of political prisoners. The Iranian regime continues to prevent access to a range of websites. In January 2006, the Iranian authorities blocked the BBCPersian.com website without any official explanation. The authorities seek to control the Farsi content of the internet by making an example of certain individuals. Webloggers Arash Sigarchi and Mojtaba Saminejad, both of whom have been charged with acting against the state, have now each been detained for over 18 months for expressing their views peacefully. The Ministry of Information has announced plans to create a "national internet", which would further limit communication between Iran and the outside world and facilitate government control.

Minorities

  70.  Religious and ethnic minorities continue to suffer widespread discrimination, particularly the evangelical Christian and Bahá'-« communities, and converts from Islam.

  71.  The Bahá'-« religion is not recognised under the constitution (According to article 13 of the constitution, Zoroastrians, Jews and Christians are the only recognised religious minorities). Bahá'-«s routinely face persecution and discrimination. Bahá'-« students face difficulties entering higher education unless they deny their faith or have it incorrectly recorded on official entrance forms. Some Iranian newspapers have run a series of articles aimed at defaming the Bahá'-« faith. Bahá'-«s have had property confiscated by the authorities or destroyed. The requirement for Iranians to identify their religion on official documents has prevented many Bahá'-« from accessing higher education, employment or adequate housing.

  72.  In March 2006, the UN Special Rapporteur on Freedom of Religion and Belief expressed her concern at disturbing reports suggesting that Iran's Supreme Leader had instructed the Iranian authorities and armed forces to identify Bahá'-«s and monitor their activities.

Women's rights

  73.  Iranians are proud that women make up over half of Iran's university intake and that Iranian women have the right to drive and vote. But domestic violence, gender inequality and discrimination remain serious problems, and as a result the representation of women in the workforce continues to be low.

  74.  The UN Special Rapporteur on Violence against Women visited Iran in early 2005. She reported that, while some positive steps have been taken to elevate women's status in recent years, there are still "gaps in guaranteeing gender equality". A woman's testimony in court is worth half that of a man, making it difficult to secure convictions for domestic violence and rape. There has been a revival in the women's movement in 2006 and 2007, focussed around a campaign to collect one million signatures for a petition listing the changes in the law thought necessary to improve gender equality. However, law enforcement forces have on several occasions used violence to suppress peaceful public protests, and several of the movement's leaders have been detained, and even charged with endangering national security.

Homosexuality

  75.  Same sex relations are illegal in Iran and can carry the death penalty. We are not aware of any individual that has been executed in Iran during the past two years solely on grounds of homosexuality. But there are concerns that people who had consensual same-sex relations had been charged with crimes such as rape and kidnap and then executed. The execution of two youths in Mashhad in July 2005 heightened concerns. We understand the alleged offences included abduction and rape. One of the youths was under the age of 18 when he was publicly hanged. We raised this case with the Iranian authorities. We continue to monitor the situation carefully.

Trades unions

  76.  Despite Iran's commitments to the International Covenant on Economic, Social and Cultural Rights which enshrines the right to form trades unions, official strikes are not allowed and independent trade unions are illegal. Small companies do not have to respect labour legislation, which affects some three million workers.

  77.  Hundreds of Tehran bus drivers were arrested for taking part in a series of strikes in January 2006. The wives of some protestors were also arrested and several houses searched. The President of the Syndicate of Workers of the Tehran and Suburbs Bus Company and prominent labour activist, Mansour Ossanlou, was also arrested and detained without charge for seven months until he was released on bail in August 2006. He has since been detained for another month, and it was reported that on 28 May he was sentenced to five years' imprisonment for "endangering national security". Another prominent labour rights activist, Mahmoud Salehi of the Saqez Workers Consumer Cooperative, was sentenced to one year's imprisonment in April. We encourage Iran to urgently implement legislation to fully respect workers' rights.

Recent developments

  78.  The last few months have seen an unmistakable increase in the repression of human rights activists, together with a tightening of restrictions on freedom of expression and association. Officials and reports from media sources loyal to the regime now frequently accuse academic individuals and groups of working towards a "velvet revolution" in Iran that would overthrow the Islamic Republic. In May 2007 three Iranian-American academics were charged with crimes including "endangering national security" and espionage. Two remain in detention. The Ministry of Intelligence in recent months has circulated a letter to universities instructing them not to have contact with foreign embassies, and in May 2007 warned academics that having contacts with foreigners brought with it suspicion of espionage.

  79.  We continue to have serious concerns about Iran's treatment of those who exercise their right to peacefully express their opinions. Since March this year, teachers across Iran have been holding large scale peaceful demonstrations to support a new pay system that would improve their living wage (over half live below the poverty line). Hundreds of teachers have been arrested for participating in these protests, including in Tehran, Ardebil, Hamedan and Kermanshah. Iran is a member of the International Labour Organisation and has ratified the International Covenant on Civil and Political Rights. These arrests are a breach of Iran's freely undertaken obligations to uphold civil and human rights such as the right to freedom of assembly, expression and association.

  80.  There appears to be a real reluctance on the part of the Iranian government to undertake the necessary human rights reforms. Talk of respect for human rights needs to be matched by a demonstrable commitment on the part of the Iranian government to improving the human rights situation.

UK and EU activity

  81.  The UK frequently initiates and participates in EU demarches and public statements criticising human rights abuses in Iran. We are often told by Iranian human rights activists that publicised EU action is helpful to their cause: it can dissuade the authorities from mistreating the individuals and groups whose cases we highlight; and the display of solidarity it represents boosts their morale.

  82.  The EU established a Human Rights Dialogue with Iran in 2002. Four rounds of the Dialogue were held, the most recent in June 2004. In view of the disappointing results, in 2004 the EU proposed revised rules of procedure aimed at making the dialogue more effective. After two years of repeated efforts by the EU, including a visit to Tehran by the EU troika, Iran finally accepted new guidelines for the Dialogue in June 2006 and a fifth round was scheduled for December. Iran cancelled this meeting after the EU co-sponsored a UN resolution on human rights in Iran.

  83.  We are disappointed that Iran has persistently avoided engaging with the international community on human rights issues. In the absence of a functioning EU or bilateral dialogue, we continue to discuss concerns with the Iranian authorities on diplomatic channels; support debate in United Nations fora and the work of United Nations mechanisms; and raise public awareness of human rights violations and the institutional failings and practices that allow them to occur. All EU countries have co-sponsored recent resolutions about human rights in Iran adopted by the United Nations General Assembly, most recently in December 2006.

IV.  RELATIONSHIP BETWEEN IRAN'S REGIONAL AND INTERNATIONAL SECURITY SITUATION AND ITS NUCLEAR AMBITIONS

Iran's position in the region

  84.  Iran regards itself as a, perhaps the, major power in the region, particularly since the 1991 Gulf War and the subsequent weakening of Iraq. Its regional ambitions are viewed with suspicion and concern, particularly by its Arab neighbours. Iran's conventional military forces are considerable by regional standards. It has some 540,000 men under arms and over 350,000 reserves. The 120,000 strong Islamic Revolutionary Guards Corps (IRGC), loyal to the Supreme Leader personally and outside the regular military chain of command, specialises in asymmetric warfare on land and sea, while the IRGC Air Force operates Iran's ballistic missile capability. The IRGC Quds Force provides training and logistic support to Iranian proxies in Iraq and Lebanon. The Basij militia has a trained reservist strength of some 300,000, and could muster up to 1,000,000 men if fully mobilised, albeit poorly trained and equipped.

  85.  Although fewer than 1,000 of Iran's nominal holding of over 1,600 main battle tanks are likely to be fully operational, this is a substantial regional capability and puts Iran on a par, on paper at least, with Jordan or Saudi Arabia. Its smaller neighbours are much less well equipped.

  86.  Still more worrying is Iran's growing ballistic missile capability. Although Iran claims this is purely defensive it has already deployed missiles, the Shahab 3 based on North Korean technology, capable of striking Israel and Riyadh, and is developing longer-range systems capable of targeting other regional states including Egypt. Iran has made no secret of its aspirations to develop a satellite launch vehicle capability. This technology has some value for longer-range and intercontinental ballistic missiles. We believe Iran could test such systems by the end of the decade. If it acquired a complete long-range ballistic missile system, it could achieve such a capability more quickly. It is worth noting that Shahab 3 missiles are paraded through Tehran annually on Army Day draped in banners bearing anti-Israeli slogans.

  87.  Iran's Navy and Air Force suffer from poor maintenance and lack of access to spare parts, but are capable of severely disrupting shipping in the Persian Gulf through land, sea and air-borne missiles and a large number of fast patrol vessels. Its capital surface fleet is small and old, but it also deploys three modern "Kilo" class submarines which, while vulnerable to western anti-submarine warfare capabilities, could operate with near impunity against regional navies and civilian shipping.

  88.  Iran's relations with Iraq never fully recovered from the Iran-Iraq War during the 1980s. However, during the recent Iraq conflict, Iran declared itself neutral. While it criticised military action, it made a commitment to remain outside the conflict. Iran says that it wants to work towards a stable and cohesive Iraq. They have direct bilateral engagement with the Iraqi Government. Iran is working with the Iraqi authorities in a number of areas such as border control and power supply. Iran hosted a conference on 30 November 2004, to discuss security in Iraq, ways to help the Iraqis stage their general election on schedule and stop the infiltration of insurgents. This was hosted by the Iranian Interior Minister. Interior Ministers and security officials from Iraq, Saudi Arabia, Kuwait, Syria, Turkey, Jordan and Egypt also participated. Iran has also participated in the recent meetings on Iraqi security at Sharm el-Sheikh, and direct US-Iran discussions on Iraqi security have begun.

  89.  However, we are gravely concerned that Iran is also providing explosives, detonators and training to the Shi'a militias who are engaged in operations against the UN forces in Iraq. We cannot be sure of the degree to which those in the senior levels of the Iranian Government are complicit in this activity. Any Iranian links to armed groups in Iraq outside the political process, either through supply of weapons, training or funding, are unacceptable. They undermine Iran's long-term interest in a secure, stable and democratic Iraq. We have repeatedly impressed on the Government of Iran, at both ministerial and senior official level, that all of Iraq's neighbours have a stake in a secure and stable Iraq, and that we welcome Iranian participation in the Iraqi-led neighbours process. UK forces take action in Iraq against any individuals or organisations, regardless of nationality, involved in the transfer of weapons and training to illegal armed groups in Iraq. The Multi-National Force, of which UK forces are a part, has the right to defend itself against attack, and to support the Government of Iraq in tackling all those who are causing instability and violence, irrespective of their nationality.

  90.  Elsewhere in the region, Iran publicly expresses its support for stability in Afghanistan, having suffered from the Afghan civil war and then the Taleban. Iran has pledged $560 million over five years to the reconstruction of Afghanistan. The two countries have developed good anti-narcotics co-operation. But we have concerns that elements of the Iranian regime are involved in supplying arms and funds to the Taleban, which is a relatively new, and unacceptable, development. We have raised this issue with the Government of Iran and will continue to do so. The UK is working closely with ISAF and international partners to help support the Government of Afghanistan deliver security and stability to Afghanistan. The support of Afghanistan's neighbours, including Iran, is crucial to this process.

  91.  The international community has expressed considerable concern about President Ahmadinejad's position on Israel. Iran opposes a two state solution to the Palestinian problem, and President Ahmadinejad has made public statements calling for the state of Israel to be "wiped from the map", repeated most recently on 3 June 2007. In this context, an Iranian nuclear weapons capability would be of great concern to all those who do not share President Ahmadinejad's views.

Iran's regional outlook

  92.  Iran portrays itself as surrounded by the US and its allies, both through Western-friendly governments in the Gulf states, Pakistan, Turkey, the South Caucasus and Central Asia, and through the presence of US and other Western forces in Iraq, Afghanistan and the Persian Gulf. Despite clear recent messages from senior US Administration figures including Secretary of State Rice that the US goal in Iran is "behaviour change, not regime change", Iran claims that the US and its allies are intent on the destruction of the Islamic Republic, justifying its active military posture.

A WMD-Free Middle East

  93.  The United Kingdom remains committed to the universalisation of the NPT and the achievement of a Middle East free of WMD and their means of delivery. We have voted for resolutions in support of such a zone at the UN, IAEA and at the NPT Review Conferences. We regularly urge Israel to clarify its current ambiguous nuclear status by acceding to the NPT as a non-nuclear weapons state, and to accede to the BTWC and CWC.

V.  REGIONAL AND GLOBAL SECURITY IMPLICATIONS OF IRAN'S NUCLEAR PROGRAMME

  94.  The British government believes that the people of Iran, and whatever government they choose, are entitled to a secure and prosperous future, and that Iran has a right to play a full part in its region. As long as Iran itself is committed to regional stability, and abides by its international obligations, we have no wish to deny Iran's right to develop nuclear energy for peaceful purposes. The E3+3 package put forward in June 2006 makes this clear. But we have made equally clear that Iran does not have the right to cause instability in the region nor to threaten its neighbours, whether by supporting groups opposed to the democratic development of Iraq and Afghanistan, or by pursuing a nuclear programme that includes proliferation-sensitive activities and is in breach of UN Security Council resolutions. That is the route to international isolation.

  95.  Iran may calculate that it would acquire greater status and influence, both in the region and in the Islamic world more widely, if it were able to obtain a nuclear weapons capability. But this would be misguided. The international community has made clear that it would oppose this.

Implications for the region

  96.  There is a widespread and credible assumption that, should Iran be seen to have successfully circumvented the constraints of the NPT and developed a nuclear weapons capability, the increased threat would encourage others in the region to follow suit. A number of regional states have recently expressed their interest in developing their nuclear power sectors, in collaboration with the IAEA.

  97.  An increase in numbers of nuclear threshold states, even if they did not go so far as to develop nuclear weapons immediately, would greatly increase tensions in an already extremely tense region, which contains a large proportion of the world's oil reserves. In addition to contributing unhelpfully to the security of a region in which extremist and sectarian violence are not unknown, this could also affect international energy security: growing fears over security of supply would be likely to create upward pressure on world oil prices for a long period, with significant economic impact in both developed and developing countries.

  98.  Those states unwilling or unable to pursue the nuclear route could be expected to increase spending on conventional arms, diverting other funds to military purposes. A more clearly polarised Gulf region would further contribute to regional insecurity and consequent increases in the world oil price, particularly with the threat to shipping lanes in the Straits of Hormuz.

Implications for the NPT

  99.  The NPT sought to prevent nuclear proliferation beyond the five nuclear-weapon states that existed at 1 January 1967 (the US, Soviet Union, Britain, France, and China). It has been largely successful, but three states have hitherto refused to adhere to it as non-nuclear-weapon states (India, Israel and Pakistan) and one, after adhering as a non-nuclear-weapon state, has since announced its withdrawal from the Treaty (the DPRK). While this has not yet led to a widespread loss of support for the NPT, there is a real concern that if Iran were to develop a nuclear weapons capability this would put the Treaty under severe pressure.

  100.  As already noted, there is a clear risk of a domino effect in the region should Iran succeed in developing a nuclear weapons capability. If this risk materialised, this would obviously seriously damage the NPT. It would also lead to a dramatic reduction in regional and global stability, increasing the chances of deliberate or accidental use of nuclear weapons.

VI.  HISTORY OF INTERNATIONAL ENGAGEMENT WITH IRAN OVER NUCLEAR NON-PROLIFERATION

Background

  101.  Iran initiated a modest civil nuclear programme in the 1950s, which continued into the 1960s with the provision by the United States of the small Tehran Research Reactor. Iran signed the Nuclear Non-Proliferation Treaty (NPT) in 1968 when it was opened for signature and ratified it in 1970 shortly before it entered into force. Subsequently, in May 1974, it concluded with the International Atomic Energy Agency (IAEA) a Comprehensive Safeguards Agreement (CSA) of the type required by the Treaty. At the same time, in the wake of the oil price rises that followed the Arab/Israeli War in 1973, the Shah began developing ambitious plans both for a substantial number of power reactors and for associated fuel cycle activities.

  102.  Two nuclear reactors to be built at Bushehr were a first step towards implementing those plans, but the Islamic revolution halted construction until the Russians agreed in 1995 to fit one of their VVER-1000 reactors into the original reactor building. Bushehr Nuclear Power Plant I (BNPP-1), is now nearing completion. The Russians have a contract with Iran to supply the first ten years worth of fresh fuel for the reactor and are willing to supply fuel for its life-time. But the initial load of fresh fuel has not yet been delivered.

  103.  This Russian relationship with Iran in connection with Bushehr is now the only significant foreign relationship Iran has in the nuclear field. Earlier plans for a wider Russian relationship with Iran on nuclear matters and Chinese involvement at an early stage with Iran's plans for a uranium conversion facility have been shelved, largely as a result of US concerns, shared to a greater or lesser extent by others, that Iran might misuse its nuclear facilities for military purposes.

  104.  International engagement with Iran over nuclear non-proliferation in recent years has been in five main phases: from August 2002 to November 2003 (ie, from the time when hitherto secret Iranian nuclear activities became public to the time when the Iranians agreed to suspend some of them); from November 2003 to November 2004 (when Iran and the E3 argued about the scope of the suspension they had agreed upon); from December 2004 to August 2005 (when Iran and the E3/EU negotiated about mutually acceptable long-term arrangements, until Iran put an end to these negotiations by resuming conversion work in defiance of the agreed suspension); from August 2005 to February 2006 (when Iran resisted all the efforts made to give it a further chance to avoid being reported to the UNSC by the IAEA's Board of Governors, and was finally so reported); and from February 2006 until now (a period which has been marked by the efforts of the E3+3 to pursue a twin-track policy, on the one hand offering Iran incentives to agree to a mutually acceptable long term arrangement and on the other hand increasing the pressure on Iran to pursue such an approach).

Revelations, Discoveries and the Search for a Suspension: August 2002 to November 2003

  105.  In August 2002 the National Council of Resistance of Iran (the NCRI) made public allegations about the existence of undeclared facilities at Natanz and Arak. This prompted an IAEA request to the Iranians in September for further information, which eventually led to a visit by the IAEA's Director-General to Iran in February 2003. During this visit the Iranians informed the Director-General that the facility at Natanz was for enrichment and the facility at Arak was for heavy water production.

  106.  Under a Comprehensive Safeguards Agreement (CSA), heavy water production facilities do not have to be declared to the IAEA or made subject to the Agency's safeguards. Moreover, under Code 3.1 of the 1976 Subsidiary Arrangements to its 1974 CSA, Iran did not have to declare an enrichment facility until 180 days before nuclear material was introduced into it. As no nuclear material had been introduced to the facility by February 2003, the IAEA could not at this stage say that Iran ought to have declared it. It is worth noting, however, that Iran introduced nuclear material into the facility in June 2003, less than 180 days after it had been notified to the IAEA.

  107.  Nevertheless the unannounced construction of these large facilities inevitably raised questions about the purpose of this work. It also emphasised the desirability of Iran agreeing to amend Code 3.1 of its Subsidiary Arrangements to reflect a 1992 Board decision that the original version of this provision in all Subsidiary Arrangements should be changed to ensure that design information on new facilities was henceforth provided to the IAEA as soon as a decision to construct, authorise or modify a facility had been taken—an amendment the Iranians accepted on 26 February 2003.

  108.  Just prior to the Director-General's visit to Iran the NCRI also made a further allegation about the involvement of a Kalaye Electric site in the enrichment programme. The Director-General was therefore able to press the Iranians about this aspect as well, and also about information supplied to the IAEA about the transfer to Iran from another State in 1991 of various uranium compounds (including some UF6, the material used as the feed for centrifuge enrichment facilities)—material which Iran had not declared to the IAEA event though it was obliged to do so under its CSA.

  109.  During the months that followed the Iranians found themselves increasingly ensnared in a web of questions about their nuclear activities to which they had to find answers. If they answered truthfully, they would reveal that they had breached their safeguards obligations. If they were discovered to have answered untruthfully, international suspicion about their activities would only increase. As the Iranian position became more and more untenable during the spring and summer of 2003, it appeared that Iran had not answered accurately, and it faced mounting pressure from the IAEA's Board of Governors.

  110.  At its March meeting the Board pressed the Director-General to make a written report to its June meeting. At the June meeting the Board agreed a Chairman's Statement on Iran, and at its September meeting the Board agreed a resolution on Iran. Both the Statement and the resolution focussed on the need for Iran to be fully transparent about its past and current activities, to give the IAEA additional information and powers to verify those activities by accepting an Additional Protocol to its CSA, and to suspend key activities until such time as international confidence in its intention had been restored.

  111.  As the autumn progressed the pressure for the IAEA Board to find Iran in non-compliance with its existing safeguards agreement and report this to the United Nations Security Council (UNSC) became increasingly strong, and was the course of action favoured by the United States.

Seeking a Suspension: June 2003 to November 2003

  112.  While we continued to seek the support of all members of the IAEA Board, the UK, with France and Germany (the "E3"), were concerned that unless a Board resolution was adopted with the support of all key states, the UN Security Council would not be able to take any credible action against Iran. Failure to take action in support of the NPT could cause serious damage to the international non-proliferation regime, and this therefore led to interest in finding another way forward with Iran.

  113.  The E3 concluded that it would be worth exploring whether Iran would agree to declare all its past and current activities, give the IAEA additional information and powers to verify those activities by accepting an Additional Protocol to its CSA, and suspend all enrichment-related and reprocessing activities, if, in return, the IAEA Board would not report it to the UNSC and if there was also a prospect of then opening a dialogue on a basis for longer term cooperation that would include acceptance of Iran developing nuclear power plants. An agreement on these lines was eventually struck in Tehran on 21 October 2003 when the E3's then Foreign Ministers met the then Secretary of Iran's Supreme National Security Council, Dr Hassan Rouhani, although Iran agreed only to suspend "enrichment and reprocessing activities as defined by the IAEA" (ie not explicitly enrichment-related activities).

  114.  Iran subsequently provided the IAEA on 23 October with a letter dated 21 October 2003 covering a declaration that it characterised as giving "a full picture of its nuclear activities", and on 10 November the Iranians moved on the Additional Protocol and the suspension (writing to the Agency that they would sign the Additional Protocol and co-operate with the Agency in accordance with it even though ratification would be necessary for it to come into force formally, and also, according to the Agency, informing it that they would suspend with effect from 10 November "all enrichment-related and reprocessing activities in Iran", including the production of feed material for enrichment processes.

  115.  In the light of these developments, no effort was made at the IAEA's November Board to have Iran reported to the UNSC for non-compliance, even though the Director-General's report to that Board made it very clear that "Iran has failed in a number of instances over an extended period of time to meet its obligations under its Safeguards Agreement" and that, "while most breaches identified to date have involved limited quantities of nuclear material, they have dealt with the most sensitive aspects of the nuclear fuel cycle, including enrichment and reprocessing."

Arguing about the Scope of the Suspension: November 2003 to November 2004

  116.  Following Iran's agreement to a suspension, attention then focussed on agreeing the precise scope of the suspension. An Iranian definition of 29 December 2003 was inadequate (it excluded all manufacture of centrifuge components and the assembly and testing of centrifuges). Much E3 effort went into securing a better Iranian definition on 23 February 2004 (which did include virtually all manufacture of centrifuge components and the assembly and testing of centrifuges).

  117.  No sooner was this agreed, however, than another issue about the scope of the suspension arose when the Iranians announced their intention to begin "hot tests" of their Uranium Conversion Facility (the facility intended to produce the feed material for enrichment plants, UF6), and then actually conducted their first such test to produce some UF6 in late May/early June 2004. In reaction, at its June 2004 meeting, the IAEA Board called on Iran to refrain from the production of UF6 and to reconsider its decision to begin production testing at the UCF. It also asked Iran to reconsider its recently announced decision to start construction of a research reactor moderated by heavy water (such reactors are ideal for producing weapons-grade plutonium).

  118.  Instead of heeding the Board's calls, Dr Rouhani wrote to E3 Foreign Ministers and the IAEA, on 22 and 23 June respectively, announcing that Iran would resume the activities it had agreed in February to suspend (ie, the manufacture of centrifuge components and the assembly and testing of centrifuges). The E3 Foreign Ministers wrote back on 30 June, saying that they were still willing to negotiate with Iran on long-term cooperation but only on the basis of a return by Iran to a full suspension (ie one embracing the activities covered by the February 2004 as well as the October 2003 agreement).

  119.  As the Director General's report to the September 2004 Board made clear, Iran nevertheless resumed the manufacture of centrifuge components and the assembly and testing of centrifuges. It also refused to accept the one measure, the placing under IAEA seal of the tested centrifuges, which the IAEA had identified as essential if it was to exercise the "supervision" over these resumed activities which Iran had said it could still undertake. In addition, the report made clear that, even though the IAEA had understood in November 2003 that Iran's suspension covered the production of feed material, Iran had begun converting 37 tonnes of yellowcake in its UCF at Esfahan.

  120.  By the late summer of 2004, the E3 was therefore beginning to focus on securing a resolution at the September 2004 Board that would ask the Director General to prepare a comprehensive summary of these and other developments for the November Board, with the idea that this might enable a case for reporting Iran to the UNSC to be made at that Board if the Iranians did not resume a full suspension. Such a resolution was achieved, and following this the Iranians engaged in further discussions with the E3 (this time with the support of the EU Council Secretariat).

  121.  To encourage the Iranians to reach a new agreement on suspension, the E3/EU outlined in October the elements of a long-term agreement that might be possible if the Iranians agreed to the E3/EU's suspension requests. And on 5/6 November in Paris the two sides reached agreement on an ad referendum text. On 15 November, after an exchange of correspondence between Dr Rouhani and the E3 Foreign Ministers and the EU's High Representative for Foreign Affairs, Dr Javier Solana, this was confirmed through an exchange of letters signed by a senior Iranian MFA official and, with the support of Dr Solana, the three E3 Ambassadors in Tehran.

  122.  In effect, Iran agreed: to continue the suspension of any introduction of nuclear material into the enrichment facilities at Natanz or elsewhere; to reinstate the suspension of the manufacture of centrifuge components and the assembly and testing of centrifuges (introduced in February 2004 but then lifted in June 2004); and to extend the suspension to cover "all tests or production at any uranium conversion installation". The suspension was to be implemented in time for the IAEA to confirm before the November Board that it had been put into effect.

  123.  In return the E3/EU agreed that: "the E3/EU will henceforth support the Director General reporting to the IAEA Board as he considers appropriate" (ie, not necessarily a written report to every Board); that they would begin negotiations in the first half of December 2004 "with a view to reaching a mutually acceptable agreement on long term arrangements"; that the E3/EU would support the IAEA Director General inviting Iran to join the IAEA Expert Group on Multilateral Approaches to the Nuclear Fuel Cycle; that negotiations with the EU on a Trade and Cooperation Agreement (TCA) would resume; and that the E3/EU would actively support the opening of Iranian accession negotiations to the World Trade Organisation (WTO).

The E3/EU-Iran Negotiations on a Long-Term Agreement: December 2004 to August 2005

  124.  Following this so-called "Paris Agreement", the E3/EU dialogue with Iran on a long-term arrangement was begun in mid-December 2004. It started with a meeting of E3 Foreign Ministers and Dr Solana with Dr Rouhani in Brussels and then with a meeting of a Steering Committee comprised of very senior officials (Political Directors for the E3/EU). Three Working Groups—on Political and Security Issues, on Technology and Cooperation, and on Nuclear Issues—started work in earnest in the new year.

  125.  These three Working Groups duly made their reports to a Steering Committee meeting on 23 March. By that stage the Working Groups on Political and Security issues and on Technology and Cooperation had both identified a number of areas where benefits might arise for Iran if a long-term agreement on nuclear issues could be agreed. By this stage initial US doubts about the E3/Iran process had moderated somewhat, and as a contribution to the success of the negotiations the US announced on 11 March 2005 that it would lift its veto on the WTO starting accession negotiations with Iran and consider, on a case-by-case basis, the licensing of exports to Iran of spare parts for civilian aircraft.

  126.  Unfortunately the Nuclear Issues Working Group remained deadlocked over the suspension issue. In essence Iran wanted the suspensions lifted quickly whereas the E3/EU wanted them to remain in place. In early May the Iranians began to indicate that they would restart conversion work at the Esfahan UCF anyway. The E3 Foreign Ministers and Dr Solana responded by writing to Dr Rouhani on 11 May warning that any change in the suspension would bring the negotiating process to an end, but also making clear that they wished to continue the dialogue and suggesting that it might be useful to meet him again. In response Iran held back from immediately resuming conversion, and in a letter of 20 May Dr Rouhani agreed to come to the proffered meeting with E3 Foreign Ministers and Dr Solana.

  127.  This meeting took place in Geneva on 25 May 2005. Although the meeting saw no progress on the substance of the disagreement between the two sides, the result was that Dr Rouhani undertook to see if his Government would agree to maintain the suspension on the understanding that the E3/EU would present their own proposals for a long-term agreement by the end of July/early August 2005—an outcome to which, after considerable internal debate, the Iranian Government agreed in early June.

  128.  The E3/EU continued to work up their proposal for a long-term agreement for presentation to the Iranians in early August. However, before that happened the Iranians wrote to the IAEA seeking the removal of its seals from the UCF. The IAEA had no option but to agree to their removal as the suspension was voluntary, but it did manage to persuade Iran not to remove them until it had put in place additional cameras to ensure that effective safeguards would be in place for when it resumed operations. This enabled the E3/EU to deliver their proposal for a long-term agreement on 5 August before any resumed activities began. On 8 August, however, the Iranians rejected this proposal as "an insult on the Iranian nation, for which the E3 must apologise" and began resuming work at the UCF. Then on 10 August they removed the seals from the UCF.

  129.  The resumption of conversion activities by Iran undermined the basis for the negotiations on long-term arrangements that had been agreed in Paris, and these negotiations therefore came to an end.

From the Resumption of Conversion to the Reporting of Iran to the UNSC: August 2005 to February 2006

  130. In other contacts with the Iranians during the autumn of 2005 the E3/EU repeatedly made it clear that, while they remained ready to resume negotiations on long-term arrangements, this could only be on the basis of a full resumption of the suspension by Iran. The Iranians, for their part, maintained that they were ready to conduct negotiations without preconditions (ie, without stopping their conversion activities). The resulting stalemate meant that the main thrust of the E3/EU's efforts was no longer on further talks with Iran but rather on IAEA Board discussions and on dialogues with other key players.

  131.  On 4 August, the E3 had sought an Emergency Meeting of the Board to take place on 9 August in response to Iran's threat to resume operations at the UCF, with the intention of asking the Board to request Iran not to resume activities there. Since they resumed them before the IAEA Board concluded its deliberations, the resulting resolution (adopted unanimously on 11 August) urged Iran to "re-establish full suspension of all enrichment related activities including the production of feed material, including through tests or production at the Uranium Conversion Facility". It also requested the Director General to provide a comprehensive full report on the implementation of Iran's NPT Safeguards Agreements and the resolution by 3 September.

  132.  The Iranians took no notice of the Board's urgings and continued with their conversion activities. The Director General duly noted this in his 2 September report to the Board, once again reiterated Iran's past failures to declare various nuclear activities, once more summarised the outstanding issues about those activities that still remained to be resolved, and for the first time indicated that full Iranian cooperation was "indispensable and overdue". On this basis the E3 chose to pursue a resolution at the September Board that would formally find Iran to have been in non-compliance with its Safeguards Agreement, but which, in the hope of offering Iran a further chance to change course, would not request the Director General to report the matter to the UN.

  133.  After the passage of this resolution the Russians took the lead in trying another approach with Iran. In essence they explored whether it might be possible to make a deal whereby Iran could continue with conversion activities, so long as the product of those activities was then exported for enrichment elsewhere and so long as Iran suspended other enrichment-related activities and did not pursue any reprocessing activities. The Russians also explored the idea of Iranian participation in an enrichment plant in Russia.

  134.  Against this background, the E3/EU concluded that they would not seek a new resolution at the November 2005 meeting of the IAEA Board reporting Iran to the UNSC, since more time should be allowed to see if the Russians could persuade the Iranians to pursue their ideas. Subsequently, the E3/EU themselves decided to agree to "talks about talks" with the Iranians in December. These talks were held on 21 December 2005 but showed that Iran had no intention of pulling back. The Russians were also making no progress in their talks with Iran.

  135.  Then, on 3 January 2006, Iran wrote to the IAEA to say that it had decided "to resume from 9 January those R&D on the peaceful nuclear energy programme which has been suspended as part of its expanded voluntary and non-legally binding suspension" (sic). On 7 January the IAEA received further communications making it clear that seals were to be removed on, among other things, centrifuge components, centrifuge quality control and manufacturing equipment, some UF6 located at Natanz, and some process equipment at the PFEP. On 8 January further communications indicated that UF6 gas would be fed into small scale gas centrifuge cascades at the PFEP. On 10 January Iran started to remove the seals at Natanz.

  136.  This development ended what remained of the suspension to which Iran had agreed at Tehran and Paris, and it led the E3 to seek an Extraordinary Meeting of the IAEA Board on 2 February. On 30 January, at a meeting of their Foreign Ministers and Dr Solana, the E3+3 (the +3 being China, Russia, and US) all agreed that the Board "should report to the Security Council its decision on the steps required from Iran and should also report to the Security Council all IAEA reports and resolutions, as adopted, relating to this issue". They also agreed that "the Security Council should await the Director-General's report to the March meeting of the IAEA Board, which would include a report on the implementation of the February Board's Resolution, and any Resolution from the March meeting, before deciding to take action to reinforce the authority of the IAEA process."

  137.  On this basis negotiations ensued on the precise terms of the resolution to be passed by the Board. In the end, a resolution was crafted that was adopted by the Board on 4 February 2006 by 27 positive votes with three negative votes (Cuba, Syria, and Venezuela) and five abstentions (Algeria, Belarus, Indonesia, Libya, and South Africa).

Developments since the Reporting of Iran to the UNSC: March 2006 onwards

  138.  Despite further attempts by the Russians, Chinese and the E3/EU to persuade the Iranians to change course, the Iranians remained defiant. After the IAEA Board's meeting in March 2006 the UNSC therefore took up the Iranian issue, and on 29 March 2006 a Presidential Statement was issued calling on Iran to heed the Board's requests as set out in its 4 February resolution. It also requested the Director General of the IAEA to report within 30 days on the process of Iranian compliance with these steps, both to the IAEA Board and in parallel to the UNSC.

  139.  Iran responded on 11 April 2006 by resuming enrichment activities at Natanz. The requested report from the Director General on 28 April 2006 duly reported this fact and other related issues. There was then a period of discussion between the E3+3 about the strategy they should now follow, involving both Foreign Ministers and Political Directors. The outcome of these discussions was agreement on a twin track strategy.

  140.  On one track the US agreed to support a further offer by the E3+3 to negotiate with Iran about a mutually acceptable long term arrangement if Iran agreed to suspend enrichment activities while the negotiations took place. On the other track Russia and China agreed that, if Iran failed to take up this offer, they would support a UNSCR depriving Iran of the right to enrich and reprocess, and also contemplate sanctions if Iran then failed to respect that UNSCR. An indication by the US on 31 May that it would join multilateral talks with Iran if Iran agreed to a suspension was an important contribution to finalising an agreement on these lines at a meeting of E3+3 Foreign Ministers in Vienna on 1 June 2006.

  141.  Following this meeting, on 6 June 2006 Dr Solana, visiting Tehran with Political Directors from the E3 and their Russian counterpart, put the new E3+3 offer to Dr Ali Larijani (Dr Rouhani's replacement as Secretary of the Supreme National Security Council following President Ahmadinejad's election the previous summer). The Iranians took the line that there were some positive aspects to the proposals but also ambiguities that needed resolving. They seemed reluctant to have an early meeting with E3+3 interlocutors to discuss these ambiguities, however, and on 8 June the Director General's report to the June Board of Governors showed that the Iranians were continuing both with their conversion and enrichment activities and with their construction of a heavy water research reactor.

  142.  In the absence of a clear Iranian response to the proposal E3+3 Foreign Ministers and Dr Solana agreed on 12 July that, since Iran was not suspending its activities, they could no longer suspend taking further action in the UNSC. Accordingly they agreed to resume negotiations on a UNSCR which would make the suspension sought by the IAEA mandatory. This was achieved on 31 July 2006 when UNSCR 1696 was adopted by 14 positive votes to one against (the vote against being cast by Qatar, which said it was inappropriate for the UNSCR to be acting on this issue rather than the Lebanese situation).

  143.  The resolution, "acting under Article 40 of Chapter VII of the Charter of the United Nations in order to make mandatory the suspension required by the IAEA", "demands" that Iran "suspend all enrichment-related and reprocessing activities, including research and development, to be verified by the IAEA." This finally put a legal obligation on Iran to suspend these activities—something that had not existed before. The resolution also made very clear that Iran could still choose the path of negotiation on the E3+3 proposal, but also that if Iran did not comply with the resolution by 31 August then the UNSC had the intention to "adopt appropriate measures under Article 41 of Chapter VII of the Charter of the United Nations".

  144.  The Iranian response to the E3+3 proposal came on 22 August. It did not agree to the UNSC's demand for a suspension as a precondition for negotiations on the proposals. This was followed by a 31 August report from the Director General of the IAEA to the Board and to the UNSC making clear that Iran was not suspending its enrichment-related activities and that various outstanding questions about its past and current activities continued to remain unanswered.

  145.  Twin tracks were then pursued again. On one track efforts were made to set up further meetings between Dr Solana and Dr Larijani to see if there might still be a negotiated way forward. On the other track the E3+3 began discussions about next steps in the UNSC. Movement on the first track came to a halt on 6 October 2006 when E3+3 Foreign Ministers heard a report from Dr Solana that his meetings with Dr Larijani had come to nothing. Movement on the second track led to UNSCR 1737 being unanimously adopted on 23 December 2006.

  146.  This resolution expanded the scope of the suspension required of Iran by deciding that Iran should without further delay suspend what it called "proliferation sensitive nuclear activities"—which it defined to mean, not only "all enrichment-related and reprocessing activities, including research and development, to be verified by the IAEA", but also "work on all heavy water related projects, including the construction of a research reactor moderated by heavy water, also to be verified by the IAEA". The Director General of the IAEA was requested to report within 60 days on whether Iran had established full and sustained suspension of all activities mentioned in the resolution, as well as on the process of Iranian compliance with all the steps required by the Board and with the other provisions of the UNSCR.

  147.  The resolution also introduced for the first time some initial sanctions on Iran for flouting the suspension requirement in UNSCR 1696. In essence these involved a ban on the export to Iran of some nuclear and missile related items, called on all States to "exercise vigilance" regarding the entry into or transit through their territories of certain individuals listed in an annex, and decided that all States should freeze the funds, other financial assets and economic resources of the persons listed in the annex and of entities listed in the annex. The IAEA was also required to end technical cooperation with Iran that related to proliferation sensitive activities, and Member States were called upon to exercise vigilance and prevent specialised teaching or training of Iranian nationals in disciplines which could contribute to Iran's proliferation sensitive nuclear activities. A Committee of the Security Council was also established to monitor the implementation of these sanctions requirements.

  148.  Having done this, the resolution once again underlined the willingness of the international community to work positively for a diplomatic, negotiated solution and encouraged Iran to engage with the E3+3 proposal of June 2006. It also indicated that if Iran suspended all enrichment-related and reprocessing activities (ie, only these and not also the heavy water related activities), then the UNSC would suspend the implementation of the sanctions measures—and then terminate them "as soon as it determines that Iran has fully complied with its obligations under the relevant resolutions of the Security Council and met the requirements of the IAEA Board of Governors, as confirmed by the IAEA Board."

  149.  In the early part of 2007 work focussed on implementing 1737. The Committee of the Council was established and started to meet. The IAEA Board agreed a Secretariat paper on which aspects of the IAEA's technical cooperation with Iran should end. Individual states (and the EU) also started to take measures to implement the resolution. In the EU case this has meant going somewhat further than the resolution, by for example imposing a full-blown travel ban on a longer list of persons and adding more entities to the list of those subject to an asset freeze.

  150.  Meanwhile, the Iranians refused to heed the UNSCR. As a result, the IAEA's Director General reported on 22 February 2007 that Iran had not suspended its enrichment related activities and had also continued with its heavy water related projects. The report also indicated that no significant progress had been made in resolving the still outstanding safeguards issues identified by the IAEA. The E3+3 responded by working up a further UNSCR which was unanimously adopted as UNSCR 1747 on 24 March 2007.

  151.  This resolution stepped up the sanctions imposed by 1737 in various ways—by adding additional persons to the list of those subject to travel restrictions (and by now calling on all States to "exercise vigilance and restraint" in relation to them), by adding additional persons and entities to the list of those subject to an asset freeze, by introducing a new call upon all States to "exercise vigilance and restraint" in the export of major conventional weapons systems to Iran, and by introducing a call on all States and international financial institutions not to enter into new commitments for grants, financial assistance and concessional loans to the Government of Iran (except for humanitarian or developmental purposes).

  152.  In addition, the Council once again reiterated its interest in a negotiated settlement, this time annexing to the resolution the E3+3's June 2006 proposals. In an important complementary move a new Statement was also issued by the E3+3 Foreign Ministers with the support of Dr Solana. This restates their commitment to seeking a negotiated solution, makes clear that—on a suspension for suspension basis—they are prepared to accept negotiations which would take place "within an agreed timeframe, extendable by mutual agreement", and proposes further talks with Iran to see if a mutually acceptable way can be found to open negotiations.

  153.  Iran has since embarked on new discussions with the IAEA about agreeing on an action plan to resolve the outstanding issues with the Agency. These have now reached a conclusion, in the form of the "Understandings of the Islamic Republic of Iran and the IAEA on the Modalities of Resolution of the Outstanding Issues" issued on 27 August 2007. While we welcome the engagement that has led to this, the key test will be the implementation of these measures by Iran. Meanwhile, Iran continues to press on with its enrichment and heavy water-related projects. It has not agreed to implement the safeguards measures contained in the Additional Protocol, and has reneged on the amendment to its Subsidiary Arrangements that was made on 26 February 2003. Nor has it been prepared to pursue the E3+3 proposals on an acceptable basis in the further contacts between Dr Larijani and Dr Solana held to date. Consequently, discussions are now taking place between the E3+3 about a further sanctions resolution.

VII.  ADDRESSING IRAN'S NUCLEAR AMBITIONS

UK Policy

  154.  We want to see Iran as a state that contributes positively to regional and global security, not one that undermines it. We want to move Iran away from its current path of confrontation with the international community. We want Iran to decide to pursue a civil nuclear programme that is for exclusively peaceful use, and poses no threat to others. We also want Iran to cease its support for terrorism and for those who are working to destabilise the region. We are determined to achieve these aims through diplomatic means.

  155.  Our commitment to the dual track process on Iran's nuclear policy will continue. We seek negotiations with Iran on a long-term agreement, allowing Iran to develop a safeguarded civil nuclear programme, while at the same time enabling the international community to be sure that it is exclusively for peaceful use. In return, Iran would receive technical assistance with its nuclear programme, as well as guaranteed fuel supplies. In addition, the international community, through the E3+3, has offered a variety of political and economic benefits, which include cooperation and assistance in agriculture, civil aviation telecommunications, and high technology, as well as support for improving Iranian access to the international economy, an energy partnership with the EU, and a regional security forum.

  156.  However, to reach the point of formal negotiations, Iran must first suspend all enrichment-related and reprocessing activities. Until Iran does so, we will continue to work with the E3+3 to further the process that has already delivered two unanimous UN Security Council sanctions resolutions. We believe that these sanctions are already having an effect, and that continuing to increase pressure on Iran through sanctions, while maintaining the incentives for cooperation, remains the most effective international response.

  157.  In implementing sanctions against Iran we and our EU partners have gone beyond the minimum requirements of Security Council Resolutions 1737 and 1747. We have introduced a legally binding embargo on the export of all dual use goods listed by the Nuclear Suppliers Group, and additional controls on a separate EU list of dual use goods. We also imposed an embargo on the export of conventional arms to Iran, and banned named Iranian nuclear missile and IRGC officials from travelling to Europe. Sanctions have been implemented against a further 23 companies and individuals involved in Iran's nuclear programme, on top of the 50 listed in Resolutions 1737 and 1747.

  158.  Due to Iran's ongoing refusal to meet UNSC obligations, there is an atmosphere of uncertainty regarding possible future sanctions which could be implemented by the UN, the EU, or any number of individual countries wishing to exert further pressure on Iran, and many companies are understandably now choosing to avoid doing business with Iran. Trade statistics show that in 2006 EU exports to Iran fell by 13% overall. The latest UK figures show UK exports to Iran for the first four months of 2007 are down 17.2% on the previous year, and imports from Iran down 30.8%. European oil and gas companies are not undertaking new investments in Iran: there have been no major contracts signed with Iran since President Ahmadinejad came to power. The Iranian Oil Minister admitted on 3 July that Iran was finding it increasingly difficult to attract foreign investment for projects.

  159.  The E3+3 twin track process has been widely supported by the international community, including by countries in the Middle East. We firmly believe that this diplomatic approach offers the best route to achieving our objectives and to preserving and improving regional and global security. Negotiations on a long-term agreement with Iran, following their suspension of all enrichment-related and reprocessing activities, also offer the best way to limit the proliferation of nuclear weapons.

  160.  International energy security would be enhanced by Iranian cooperation on nuclear concerns. Tensions in the region related to the nuclear programme would subside, and investment in Iran's hydrocarbon production sector would be likely to rise once Iran had re-engaged with the international community on the nuclear issue, both within and beyond the EU-Iran energy partnership offered in the E3+3 proposal.

  161.  We continue to press Iranian Ministers and officials to improve Iran's record on human rights, and raise with them our concerns about Iran's destabilising role in the region. We seek greater cooperation with them on issues such as counter-terrorism and counter-narcotics.

  162.  Our attempts to engage with the Iranian Government will continue. We look forward to continuing to work with our international partners to achieve our shared objective: Iran as a co-operative member of the international community, living by international norms; and a positive contributor to global security.

Foreign and Commonwealth Office

London

August 2007

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1   The "P-1" is the enrichment centrifuge design originally obtained by the Pakistani scientist AQ Khan while he was working for URENCO in the 1970s and provided to Iran by the procurement network from which it obtained its nuclear technology in the 1980s and 1990s. The P-2 is a more advanced and more efficient design developed by Pakistan in the 1980s, the designs for which were also provided to Iran by the procurement network. Back

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Prepared 2 March 2008