Iran Promises UN It Will Suspend Uranium Enrichment

Iran told the United Nations nuclear
watchdog that it agreed to a European Union proposal to
voluntarily stop uranium conversion starting Nov. 22, to ward off
U.S. calls that the Islamic government be subjected to sanctions
by the UN Security Council.
Iran ``decided on a voluntary basis and as further
confidence-building measures, to continue and extend its
suspension to include all enrichment-related and reprocessing
activities,'' the International Atomic Energy Agency said in a 28-
page report obtained by Bloomberg News and to be presented to the
agency's governors Nov. 25 in Vienna. ``Iran invited the Agency
to verify this suspension starting from Nov. 22, 2004.''
Iranian officials have been negotiating with diplomats from
France, Germany and the U.K. for more than a year. The U.S. says
Iran is converting uranium as part of a clandestine nuclear
weapons program. Iran, the second-largest oil producer in the
Organization of Petroleum Exporting Countries, says it needs to
process the uranium for nuclear fuel to generate electricity.
Iran has made ``good progress'' since opening negotiations
with the EU in letting IAEA inspectors verify the extent of its
nuclear program, the agency said in the report. Before 2003, Iran
was guilty of ``many breaches'' of its IAEA treaty obligations,
according to the report.
The IAEA report, to be presented by Director General Mohamed
ElBaradei, isn't the end of the agency's investigation. The IAEA
is ``not yet in a position to conclude that there are no
undeclared nuclear materials or activities in Iran,'' the
document said. ElBaradei will continue to report to the board of
governors about Iran.

EU Deal

Under the terms of its EU deal, Iran agreed to suspend ``any
activity for undertaking plutonium separation,'' the IAEA said.
Iran also said it will stop making and importing gas centrifuges
and all conversion tests.
`'We want a durable, cooperative and long-term partnership
with Iran,'' Javier Solana, EU high representative for the common
foreign and security policy, said in a statement released in
Brussels. ``This agreement opens the way.''
Solana called the agreement a ``first step, and that is very
important.''

Within `Red Lines'

Iran's suspension falls short of a total halt to uranium
enrichment. That means the issue may resurface, analysts said.
``We stayed within our red lines, and this red line meant we
could suspend enrichment but not stop it,'' Iran's Foreign
Ministry spokesman Hamid Reza Asefi told reporters in Tehran
today, Agence France-Presse reported earlier.
``There'll probably be further crises focusing on Iran's
nuclear program in future, but investors know it's part of doing
business here,'' Albrecht Frischenschlager, a partner at Atieh
Bahar Consulting, who has been advising companies such as British-
American Tobacco and Rolls Royce since 1998, said in a telephone
interview from Tehran. ``They know that tensions are often
diffused at the last minute.''
The Iranian government said in September there were
applications for $8.2 billion of foreign investment so far this
year, roughly equal to the total figure in Iran since 1997. The
fact that investments, both foreign and domestic, continue to
rise shows companies ``have learnt to cope with'' uncertainty,
Frischenschlager said.

Trade Barriers

Iran's deal with the EU could strengthen trade ties between
the regions worth $16 billion euros ($20.7 billion). In exchange
for stopping uranium enrichment, the EU had been offering Iran
civilian nuclear reactor technology and the removal of trade
barriers.
``We appreciate any deal which is clear and accepted by the
IAEA,'' said Klaus Friedrich, spokesman on export controls and
the Middle East for Germany's machinery and engineering trade
group, VDMA, in a telephone interview from Frankfurt. ``We hope
that the threat of embargo is past us.''
Europe, Iran's main trading partner, had a 2.3 billion-euro
trade surplus with Iran at the end of 2003, according to EU
statistics. Exports to Iran averaged 25 percent annual growth in
the last four years. Machinery and mechanical appliances
represent about half of all EU exports to Iran, or around 4.5
billion euros last year.
``From a machinery point of view, Iran absorbs more German
trade than India and is on the same level as Brazil, Canada and
Mexico,'' Friedrich said.

U.S. Stance

Iran hasn't run a trade surplus with the EU since 2001, when
it exported 186.3 million euros more goods than it absorbed. Oil
and oil products last year represented almost 90 percent of
Iran's exports to the EU, or around 6 billion euros.
The EU and the U.S. have differed over policy toward Iran.
The Europeans have favored more diplomacy, while the U.S. cut off
relations after its Tehran embassy staff was taken hostage for
444 days in 1979.
Unlike the EU, the U.S. prohibits most trade with the Iran
because of its alleged support of Middle East terrorist groups
such as Hezbollah. The U.S. also forbids its companies from
investing in Iran or selling high-technology goods such as
computers or aircraft there because it says the Islamic
government gives support to terrorist groups. Iran denies the
accusations.
Iran's deal with the EU may be a strategic move by the
government in Tehran to ease U.S. unilateral sanctions, according
to Atieh Bahar. Iran has regularly accused the U.S., which it
labels ``The Great Satan,'' of only using a stick while European
governments use both incentives and threats.

Jobless Rate

``The Iranians want the EU to convince the U.S. to change
its attitude toward them, and they'll use today's voluntary
suspension as a means of pressure,'' Frischenschlager said. U.S.
economic sanctions have slowed Iran's economic progress. While
the country is the second-largest oil producer in the Middle
East, it has an official unemployment rate of 16 percent. More
than four-fifths of the $110 billion economy is state-run.
``Iran's trade links are pretty undeveloped,'' said Fitch
Ratings analyst James McCormack, who rates Iran ``B+ positive.''
Fitch also rates Indonesia and Turkey B+. ``An agreement might
help at the margin but they still need a lot of investment to
increase economic output,'' he said.