Hopes Slowly rising as Iran Talks Continue

The IAEA has today been negotiating with Iran on the modalities around tighter nuclear inspections within Iran. On Wednesday senior officials from the E3+3 (P5+1) and Iran meet in Baghdad for the follow-on talks after those last month in Istanbul appeared to end with a little more optimism than the previous round. IAEA Secretary-General Amano has been uncharacteristically optimistic about progress.

Many analysts believe that Iran’s new-found enthusiasm to negotiate comes as a direct result of pressure from sanctions, particularly as the deadline for the EU’s imposition of oil sanctions hits on July 1 and the Israelis continue to threaten unilateral military action. The value of the Iran Rial has plummeted, and inflation is running very high. But there are several other reasons for Iran’s position as well. Oil prices have this year fallen, in part perhaps because oil traders have reduced expectations of a military strike in 2012, so that Iran’s budget is under tighter pressure even without the drop in the quantity of its oil exports. The Supreme Leader is in a better political position domestically, giving him greater freedom to negotiate from a position of strength. Most importantly, all sides, Iran included, have been scared into talks by the speed at which relationships at the start of 2012 deteriorated so quickly and threatened to spiral out of control. Cooler heads have the upper hand.

However, it would be premature to place too many hopes on the talks this week. Diplomats recognise only too well that breakthroughs are highly unlikely, and will take more time. Whilst accusations in the western media have been made of Iran that they will be stalling on a deal to ensure they have the space to enrich, the reality is more that the West will stall on any significant deal until the domestic political atmosphere is ripe. The E3+3 position is greatly hampered by disunity, particularly between the United States and Europe on the one hand, and Russia and China on the other. Another wild card, the IAEA is later this week expected to release its quarterly report on Iran’s nuclear activities. The report is likely to show that the Iranians continue to build up their stocks of enriched uranium, including that at 20%. The Iranians may feel this news strengthens their hands in negotiations, but it may also make it more politically difficult for U.S. and European governments to compromise.

All sides in Baghdad want to stay at the negotiating table – none want the military strikes threatened by Israel to occur. But it is going to take more than simply talking and the possibility of progress to prevent them. The most obvious way forward is to agree on confidence-building measures, such as a deal on suspending 20% enrichment, safeguarding and transferring stocks, and providing fuel for the Tehran research reactor, with a step-by-step approach, as outlined in the Oxford Research Group report I co-authored, published today. Such proposals have been doing the rounds lately – there are several blue-prints to choose from that ensure all sides save face and that at each step all sides make gains. It’s time now for the politicians and the media to come on message – that a deal is there for the taking.

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