THE CURRENT SITUATION
40. We now set out the current state of affairs at
the UN Security Council, the European Union and within the United
States, Russia and China. We also consider the current IAEA 'work
plan' with Iran, and note the continued efforts of Javier Solana,
as the E3+3 representative, to find a path towards restarting
substantive negotiations with Iran.
41. As noted above, Dr Javier Solana has represented
the E3 and E3+3 in its talks with Iran's nuclear negotiators since
2003 (most recently Dr Ali Larijani and Dr Saeed Jalili). Dr Solana's
task is to convince Iran to suspend its enrichment before what
the FCO calls "formal negotiations" can begin.
In late November 2007, Dr Solana met Dr Jalili in London. Following
the meeting, he said, "I have to admit that after five hours
of meetings I expected more, and therefore I am disappointed".
He had labelled talks in Rome five weeks prior to this meeting
Without progress on the 'carrot' side of the international community's
strategy, attention has been paid elsewhere to what 'sticks' can
be deployed to convince Iran to change its course.
The Security Council
42. At the time of drafting this Report, the E3+3
has agreed the contents of a draft Security Council resolution
that would impose a third round of sanctions against Iran, but
the contents of this draft have not yet been made public.
Antony Phillipson told the Committee that the UN sanctions against
Iran under Resolutions 1737 and 1747 were "deliberately"
The sanctions were limited, and deliberately
so. As the Minister has said, they were targeted on the nuclear
and missile programme because that was the issue that the UN Security
Council was addressing. With regard to their effectiveness, they
have had some economic effect. It has not been great or dramatic
because they were not very harsh, partly so as not to allow the
regime to say that we were hitting the Iranian people.
He argued, however, that they had also had a "political
The Iranians were surprised to have two 15-0
votes in December 2006 and March 2007, and we all want to work
hard to protect that unity with the E3+3 [
] and within the
broader UN Security Council when we get there.
Paul Arkwright, the head of the FCO's counter-proliferation
department, added that the current UN sanctions on Iran's nuclear
technology may have slowed down its nuclear programme, whilst
also making it clear that it was now illegal for states to transfer
particular types of dual-use goods to Iran.
43. We asked Mr Phillipson whether Russian and Chinese
reluctance to endanger their business interests with Iran would
limit the economic impact of UN sanctions. He replied:
The honest answer to your question is that there
is no prospect of the next UN resolution hitting investment in
the oil and gas sector, but there will be an escalation of the
sanctions and a tightening of the screw. 
At the same evidence session, Dr Howells called the
current UN sanctions "pretty weak", adding, "I
do not think that the UN has gone out of its way to cripple Iran
by any means."
Despite this, Mr Phillipson stressed that it was the UK's preference
for the UN to be the "principal vehicle" for sanctions
as it "applies the broadest possible waterfront".
The European Union
44. In implementing Security Council Resolution 1737,
the EU has chosen to go beyond the sanctions imposed by the United
Nations (as it is entitled to do). This includes a travel ban
on a longer list of persons and adding more entities to the list
of those subject to an asset freeze.
These were achieved through common positions agreed in February
and April 2007. Mr Phillipson explained the logic behind this:
We did that in order to have the EU do its bit
and also because what the Iranians try to do when they look at
the international community taking action against them is to look
for comfort and for people who have not taken action. The EU,
acting on the back of the UN, reinforced the political message
of the UN sanctions regime.
Referring to possible future sanctions, he added
We will be pushing very hard for the EU to be
in a position to reinforce anything that the UN does, or if the
UN track fails, for the EU to be in a position to try to fill
the gap, because otherwise the result will be no pressure at all
on Tehran. 
45. The Prime Minister, Rt Hon Gordon Brown MP, has
argued that the EU should go beyond merely reinforcing the UN's
actions by proposing a course of action that Mr Phillipson acknowledged
had "no prospect" of success in the Security Council.
In his first foreign policy speech at Mansion House, the Prime
Minister stated that the UK would "lead in seeking tougher
sanctions both at the UN and in the European Union, including
on oil and gas investment and the financial sector" (the
latter taken to include export credits).
Despite strong support for harder sanctions by the French Government,
Dr Howells admitted to the Committee that "there are obvious
differences within Europe; there is no question about that."
46. The main opponents to tougher EU sanctions are
believed to be the Germans and Italians, who both enjoy a relatively
strong economic relationship with Iran. A senior German diplomat
told the International Herald Tribune, "unilateral sanctions
don't make any economic sense".
The concern is that if sanctions are not globally enforced, the
'slack' created by European sanctions will be taken up by Chinese
and Russian companies. Under this thesis, the impact of sanctions
would be felt by European businesses, not by Iran, which would
merely shift trading partners. We consider what role sanctions
should play in resolving the crisis (including how effective they
can be in changing Iran's decision-making) in the final chapter
of this Report.
The United States
47. The United States Government's relationship with
Iran has been consistently poor since the Islamic Revolution and
the hostage crisis involving US diplomats in Tehran. In his January
2002 State of the Union Address, President George Bush labelled
Iran as part of the "axis of evil" (with Iraq and North
Korea), a comment that was still resented in Tehran when we visited
nearly six years on. The US stance on Iran's nuclear programme
has been tough. However, the US continues to contribute to the
E3+3 process, and has committed to talking to Iran if it meets
the precondition of suspending its uranium enrichment. Dr Howells
acknowledged that the motives of the US with regards to Iran were
"as complex as all of us". Whilst President Bush has
refused to take the military option off the table, Dr Howells
argued that "they realise that they have enough problems
as it is in Iraq and Afghanistan without a new war in Iran".
48. The US has long had unilateral sanctions in place
against Iran. In October 2007, Secretary of State Dr Condoleezza
Rice announced further sanctions, specifically targeting the elite
Islamic Revolutionary Guards Corps (IRGC), which she accused of
"support for proliferation". Two Iranian state-owned
banks were also sanctioned due to their alleged support for proliferation.
Alongside its nuclear concerns, the US also designated the Quds
Force (an arm of the IRGC) as a supporter of terrorism.
However, at the same time as increasing the pressure on Iran,
the US has also held formal bilateral talks with Iran for the
first time in nearly three decades.
These have been held at Ambassador level in Baghdad and they have
been narrowly confined to the issue of Iraq.
49. The publication of the National Intelligence
Estimate in December 2007 has significantly altered the debate
about Iran in the US. The Democratic response to its assessment
that Iran stopped work on a nuclear weapons programme in 2003
was to call for a 'diplomatic surge' to engage with Tehran. Leading
Republicans also used the document to urge against the possibility
of a military strike against Iran. However, President Bush told
a press conference: "Iran was dangerous. Iran is dangerous.
And Iran will be dangerous if they have the knowledge necessary
to make a nuclear weapon".
50. US Congressmen such as the late Tom Lantos, Chairman
of the House of Representatives Committee on Foreign Affairs,
with whom we had discussions during our visit to Washington in
October 2007, have previously sought to visit Iran but have been
denied visas by Tehran.
Iran's reluctance to engage with these Congressmen may partly
be a result of the fact that there are no diplomatic relations
between the two Governments. It may also reflect anger over controversial
Congressional support for regime change and democracy promotion
Russia and China
51. China and Russia make up the remaining two members
of the E3+3. They both have significant economic relations with
Iran. Indeed, Dr Howells told us that China was "positively
slavering" at the potential market in Iran.
Russia and Iran enjoy the world's largest and second largest reserves
of gas, and there has been talk of establishing a potential cartel.
For its part, China has agreed a $100bn, 25-year gas deal with
52. Russia has also assisted Iran with the construction
of its nuclear reactor at Bushehr, which is due to go online by
late 2008. Russia is under contract to provide the fuel for the
reactor, and Iran received its first shipment of uranium fuel
in December 2007. The Russian Foreign Ministry said: "All
fuel that will be delivered will be under the control and guarantees
of the International Atomic Energy Agency for the whole time it
stays on Iranian territory." The Associated Press has noted
that Russia has been protective of its relationship with Iran
over Bushehr, and asked for the removal of any reference to the
project in Security Council sanctions. The US, despite initially
questioning the deal, appears now to support it. President Bush
argued: "If the Russians are willing to do that [
the Iranians do not need to learn how to enrich." However,
Iran replies that it plans to build more nuclear reactors, for
which it will require further enriched uranium.
With regard to China, the FCO notes that it was involved at an
early stage with Iran's plans for a uranium conversion facility,
but that these were shelved "largely as a result of US concerns,
shared to a greater or lesser extent by others."
53. Russia and China have been more reluctant than
others in the E3+3 to impose sanctions against Iran, but they
nonetheless agreed to the two current rounds of UN sanctions.
Following the publication of the National Intelligence Estimate,
China's Ambassador to the UN appeared to question the need for
a new round of sanctions.
Dr Ali Ansari told the Committee that it would be hard to predict
the behaviour of Russia and China with respect to firmer sanctions
but that "the Russians are unlikely to give support. It is
clear that the current Iranian Government, in particular, are
counting on that."
This presents a serious dilemma to those countries, like the UK,
that are seeking much stronger action at the Security Council.
54. The IAEA has played a pivotal role in the international
community's efforts in responding to Iran's nuclear programme.
As the body monitoring compliance with the NPT and associated
safeguards agreements, it has played a natural role. Its Director-General
and inspectors have produced authoritative technical assessments
on which the international community's diplomatic policies have
55. The most significant recent development in the
IAEA's relations with Tehran is its agreement in August 2007 of
a 'work plan' to resolve outstanding questions about Iran's previous
nuclear behaviour. In his November 2007 Report, Dr ElBaradei noted
progress in a number of areas of the 'work plan', including on
aspects of Iran's centrifuge programmes. However, he noted that
Iran's cooperation was "reactive rather than proactive".
In its written submission, the FCO wrote that "the key test
will be the implementation" of the measures that were agreed
to in the 'work plan'.
Further and more active cooperation by Iran with the IAEA could
be a way to generate a better atmosphere than as of present. In
January 2008, Iran agreed with the IAEA that it would clarify
all outstanding questions on its programme within a month.
The Overall Dynamic
56. We present our assessment of the international
community's policies towards Iran, and how these policies should
be modified, in the final chapter of this Report. This chapter
has set out the parameters of some of the debates revolving around
Iran's nuclear programme, looking at the different concerns of
some of the key states involved in the E3+3. If one considers
the 'twin-track' strategy of the E3+3, it is evident that there
is currently greater discussion about what coercive measures should
be in place against Iran rather than on whether the incentives
provided to Tehran are sufficiently enticing for it for it to
be able to suspend enrichment and resume formal negotiations.
Whilst there are no new proposals to modify the June 2006 offer
to Iran, it is clear that the UK Government and its allies wish
to make sanctions more punitive than they currently are. In our
final chapter, we consider whether this approach is the correct
57. We conclude that the E3+3's diplomacy over
Iran's nuclear programme is currently a long way from successfully
achieving all its goals. We acknowledge, however, that its establishment
has been useful in maintaining some degree of international unity
towards Iran, thus adding to the diplomatic pressure on the Iranian