July 2006 Monthly Forecast



Expected Council Action
No Council action is expected in the first half of July unless, contrary to expectations, Iran responds early (and negatively) to the P5 plus Germany’s package of incentives.  From mid-July onwards, increased US pressure seems likely and this could take the form of bringing the issue back to New York-perhaps initially by raising it in Informal Consultations of the Council.

Outright rejection of the package by Iran seems unlikely. It is probable that the options facing the Council will be how best to respond to a nuanced, ambiguous or obfuscatory response. In these circumstances:

Council Dynamics
At the US-EU Summit in June, the EU and the US in their joint summit declaration stated that if Iran does not engage in negotiations then further steps would be taken in the Council. However, the US appears to be viewing the package as an ultimatum that will either bring Tehran to the negotiating table and suspend enrichment activity or lead directly to sanctions.  It is unclear whether the EU3 countries may be open to discussing at least one further step towards a diplomatic, negotiated solution, especially if Iran comes back with an ambiguous response or with counter-proposals. Although China and Russia agreed to the incentives/disincentives package and are therefore likely to support a stronger response than was on the table in May, they are also likely to continue to argue for a cautious approach and to be keen to proceed by way of further incremental pressure before agreeing to the imposition of sanctions.

The ten elected Council members remain outside the loop, with varying degrees of discomfort.  But there is a sense that the Council, on this issue, will accept whatever the P5 agree.

Recent Developments
For a full description of the background of this issue please see our February, March, May and June 2006 Forecast Reports.

The P5 plus Germany on 1 June agreed to offer Iran a package of incentives as a basis for further discussion, as predicted in our June 2006 Forecast Report. On 6 June EU High Representative for the Common Foreign and Security Policy Javier Solana took the incentives package, which included the suspension of action in the Council, to Tehran. The package is a mix of trade, security and technology benefits but it comes with the condition that Iran suspends all enrichment-related and reprocessing activities. In a departure from a foreign policy position held since the 1979-1981 Iran hostage crisis, the US has also agreed, as part of the incentives package, to participate in direct nuclear talks with Iran and to partially lift sanctions.

The details have not been publicly released but it is believed that the following incentives are included:

The 1 June statement from the P5 plus Germany also indicated that if Iran does not agree to negotiate, further steps would be taken by the Council. Possible disincentives include an embargo on the export to Iran of goods and technologies relevant to nuclear programmes, freezing of assets of organisations and people involved in the nuclear programmes, a visa and travel ban for senior Iranian officials and perhaps an embargo on exports to Iran of other strategically important products (e.g. refined petroleum products).

On timing, contrary to many expectations at the end of May (and contrary to the prediction in our June 2006 Forecast Report), the disincentives part of the package (i.e. the resolution) was not tabled in the Council. This was an important concession by the US, giving space and time for Tehran to work through the issue.

But, senior US officials have made it clear that they expect Iran to respond quickly.  They have said that they would like to hear from Iran by the last week of June or by mid-July at the latest.  The US time-frame appears to be related to the G8 Foreign Ministers meeting in Moscow on 29 June and the G8 Summit in St. Petersburg on 15 July.

Iran has responded fairly constructively in public and has agreed to study the offer.   But it seems to be working on a different time schedule. The Iranian President, Mahmoud Ahmadinejad, has said that Iran will respond by mid-August to the package of incentives.  Ali Larijani, Iran’s chief negotiator on nuclear issues, has said that while there are some positive steps in the proposals, the key issue of uranium enrichment was ambiguous and needed to be clarified. 

At the 12 June meeting of the IAEA governors, the IAEA Director General, Mohamed ElBaradei welcomed the package of measures offered to Iran and reiterated his belief that this issue can be resolved through dialogue and mutual accommodation. 

On 22 June the Secretary-General met with the Iranian Foreign Minister Manouchehr Motaki who informed Annan that Iran was considering the package very seriously and was willing to negotiate if there were no pre-conditions.  The Secretary-General indicated that his impression was that, on timing, a response before the middle of July was unlikely. A further meeting with the Secretary- General was held in New York on 28 June where Annan urged Iran to speed up its response to the proposals.

At the time of publication, Javier Solana was expected to meet with Ali Larijani at the end of June to clarify what Larijani has referred to as the “ambiguities” in the proposal. 

Key Issues
The main issue now that the package of incentives has been offered is Iran’s response. If Iran insists on long term uranium enrichment the Council will have to decide on how to respond.

A second issue is whether suspension should be a condition precedent for moving forward with talks. Iran wants negotiations without “pre-conditions” while the P5 and Germany want suspension of uranium enrichment as a condition before any talks are held.

A related issue arises if Iran offers counter-proposals rather than a straight yes or no.  For example Iran could suggest restrictions on the number of uranium-spinning centrifuge machines it operates or refrain from industrial-scale uranium enrichment but not on small-scale enrichment projects.

Underlying Problems
There are reports that the delays in Tehran may be linked to an internal struggle between radical and pragmatic leaders. Whether Iran is able to accept a halt in uranium enrichment during negotiations may depend on the outcome.  

Most Recent UN Documents

 Latest IAEA Board Resolution
 Latest IAEA Reports
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