Tug of War with Tehran

The U.S.-Iran standoff is at a critical juncture. The sides are at a fork in the diplomatic road; either serious talks or dangerous escalation could dominate news headlines this summer.

The IAEA's May 23 report on Iran's nuclear program confirmed that Tehran has made substantial technical progress and detailed new limits on inspections and monitoring. The report will lend momentum to a U.S.-led drive for a third UN sanctions resolution. Movement on sanctions will in turn be affected by the outcome of a May 28 U.S.-Iran dialogue on Iraq. Talks are unlikely to result in a speedy diplomatic solution, and another UN resolution is probable.

The report documents that Iran has made significant progress since February 2007. Tehran now has 1,300 centrifuges enriching uranium gas simultaneously, 328 more ready to go and is installing an additional 492 machines. So Iran will soon have over 2,100 operational centrifuges and will likely achieve its target level of 3,000 operational machines by the end of June. The IAEA is verifying Iran's claim that it has reached enrichment levels of 4.8 percent, which is reactor-fuel grade. The report does not document how efficiently or in what quantities Iran is enriching; however, in February Iran had at most 328 centrifuges performing enrichment, so real strides have been made. Iran has also increased significantly the quantity of uranium hexafluoride (UF6) gas that is being fed into the centrifuges. Since February, Iran has introduced 260 kg of uranium into the cascades (in all of 2006, Iran consumed only 100 kg of UF6).

The IAEA also reported that inspections of the heavy-water reactor in Arak have been suspended. The reactor is designed to produce plutonium, but is on a slower track than the uranium program and is not expected to come on line until 2010 at the earliest. But the IAEA is now essentially extremely limited in its ability to monitor this path to nuclear capability. The report also highlights a lack of Iranian transparency on many issues, concluding that the Agency's monitoring ability has "deteriorated."

Estimates of how quickly Iran is moving vary. Many experts believe Iran is likely to master nuclear technology by early 2008 and could produce enough fissile material for a crude bomb by sometime in 2009-if it chose to pursue a weapons capability. Other experts believe it will take Iran considerably longer to obtain these technologies. IAEA Director General Mohamed El Baradei has publicly stated that Iran essentially has nuclear technology, making the goal of a suspension to prevent this meaningless. The United States, UK, France and Germany will protest his comments; moreover, suspension would still prevent Iran from stockpiling enriched uranium, which when used as feedstock for centrifuges reduces the time to a bomb.

According to UN sources, discussion of a third round of sanctions could begin next week. Measures could include a ban on government guarantees for exports to Iran as well as more sanctions against Iranian banks and other entities. These same sources report that Russia and China are increasingly likely to support the harsher measures. Iran's May 22 announcement that gas prices rose by 25 percent and that gasoline would be rationed as of June 7 indicate Tehran is preparing for additional sanctions.

On May 28, senior U.S. and Iranian officials will meet in Baghdad to discuss Iraq. EU foreign policy chief Javier Solana and head Iranian negotiator Ali Larijani could meet on the nuclear issue at the end of May. The talks will likely slow movement on sanctions. There is perhaps a 30 percent chance that the parallel talks will lead to wide-ranging talks involving the Untied States, which would slow sanctions even more. The timeline will become clearer in several weeks.

On May 23, the United States sent two carrier strike groups, a total of nine warships and 17,000 personnel through the Strait of Hormuz in daylight-a deterrent show of force. The IAEA report, coupled with saber-rattling by both sides, raises both the stakes and tensions.

The U.S.-Iran standoff is at a critical juncture. The sides are at a fork in the diplomatic road; either serious talks or dangerous escalation could dominate news headlines this summer.

Cliff Kupchan is a director at Eurasia Group, a political risk consultancy.