Heat Rises Under Iran

[Canard]

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Heat Rises Under Iran(Oh my what a clever title,  :roll: )
U.S., Europe Vow
Additional Penalties
If Nuclear Talks Fail
By JAY SOLOMON
July 21, 2008

The U.S. is fine-tuning new financial penalties against Iran that would target everything from gasoline imports to the insurance sector, and the prospect of such sanctions grew after talks over its nuclear-fuel program this weekend made no progress.

U.S. and European officials said they will intensify efforts to impose these penalties should their diplomatic drive fail to induce Iran to freeze its nuclear program. The sanctions effort could include measures to impede Iran's shipping operations in the Persian Gulf and its banking activities in Asia and the Middle East, the officials said.

On Saturday, talks with Iran in Geneva failed to produce any progress, despite U.S. participation at the highest level since the 1979 Iranian revolution. Represented by European Union foreign-policy coordinator Javier Solana, the U.S., Russia, China, Britain, France and Germany gave Iran two weeks to respond to Mr. Solana's proposals to launch real negotiations or face further sanctions.

The five permanent members of the United Nations Security Council, plus Germany, are offering Iran economic and energy assistance, security assurances and enhanced diplomatic ties in exchange for concessions on its nuclear program.

"We have not gotten all the answers to the questions," Mr. Solana told reporters after Saturday's meeting. He said the two-week timeframe was meant to give Iran the space to come up with "the answers that will allow us to continue."

In Washington, a U.S. official was more blunt. "We hope the Iranian people understand that their leaders need to make a choice between cooperation, which would bring benefits to all, and confrontation, which can only led to further isolation," said State Department spokesman Sean McCormack.

The Security Council has demanded that Iran suspend its uranium enrichment program, which can produce civilian- or weapons-grade nuclear fuel. Iran has said repeatedly it won't do that, but there had been hopes Saturday's meeting could launch a period of preliminary talks that could start if Iran agreed temporarily to freeze its enrichment at current levels in exchange for a freeze on further sanctions.

In a sign of these hopes for progress, the U.S. sent Undersecretary of State for Political Affairs William Burns, Washington's No. 3 diplomat, an unprecedented move in the nuclear talks with Iran, which have been going since 2003. American officials said Mr. Burns's attendance would also make it easier for the U.S. to compel its negotiating partners to impose tougher measures should this "freeze-for-freeze" approach fail.

A number of Western diplomats and strategists acknowledge there is significant risk in President George W. Bush's decision to directly engage Iran on the nuclear issue. For one, they say, the Iranians could use the negotiating process as a means to divide the Europeans and Americans over sanctions while continuing to enrich uranium.

These officials also said the negotiating track could allow Tehran simply to wait out the Bush administration, while seeing if a new U.S. president takes a more conciliatory line towards Iran. Some analysts estimate that Iran could have produced enough fuel for a nuclear bomb by late next year.

"They might accept a 60-day suspension to examine the seriousness of the proposal," said David Wurmser, a former Middle East adviser to Vice President Dick Cheney. "They'll do that for 60 days and move ahead with their program."

The talks are part of a complex diplomatic game being played out in the region, the outcome of which is impossible to predict. In addition to the talks on nuclear proliferation, the Israelis are talking indirectly to the Syrians about a possible peace deal and have entered into agreements with Islamic militant groups Hamas and Hezbollah. Some senior U.S. analysts worry these overtures could be a prelude to an Israeli attack on Iran's nuclear facilities.

Still, the Bush administration has signaled it is prepared to accelerate the diplomatic embrace of Tehran if the current talks prove successful. In addition to the economic incentives outlined in Mr. Solana's proposal, U.S. officials have said they are considering opening a small diplomatic mission in Tehran in the coming months if the Iranians are receptive. And Washington has been seeking to accelerate other interpersonal exchanges between groups such as Olympic athletes, doctors and students.

If Iran balks, a principal focus of any new penalties would be the country's imports of refined petroleum products, particular gasoline, said U.S. and European officials.

The Treasury Department's point man on Iran, Undersecretary for Terrorism and Financial Intelligence Stuart Levey, has been meeting government and private-sector officials in Italy, Spain and France to lobby American allies about the risks of doing business with Tehran.

Because of a lack of refining capabilities, Iran is forced to import roughly 40% of its gasoline from European, Indian and Venezuelan companies. In 2006, Iran paid roughly $5 billion for gasoline, making it the second-largest importer, after the U.S. The Iranian government was forced to ration gasoline last year due to financial and supply pressures, setting off unrest in some areas of the country.

U.K. Prime Minister Gordon Brown publicly pushed EU ministers last month to consider targeting Iran's oil and natural-gas industry, should talks stall.

Write to Jay Solomon at mailto:jay.solomon@wsj.com">jay.solomon@wsj.com