TEHRAN – In the high-stakes nuclear poker game between Iran and the EU-3 (Britain, France and Germany), Tehran has decided to call the EU’s bluff and turn the game around.

On top of it Ali Larijani, the new head of the Supreme National Security Council – appointed by President Mahmud Ahmadinejad – and now Iran’s top nuclear negotiator, stressed on Iranian TV that the criticism expressed in Saturday’s report by International Atomic Energy Agency (IAEA) head Mohammad ElBaradei was “neither legal nor technical” and distorted by political motives. (“The nuclear issue is a national issue. They [a reference to the EU-3, not the IAEA] should not talk to Iranian people with bullying language.”)

Larijani once again stressed that as a signatory to the nuclear Non-Proliferation Treaty (NPT), Iran had the right to develop the nuclear fuel cycle for civilian purposes. Right on cue, Foreign Ministry spokesman Hamid-Reza Asefi added that “access to peaceful nuclear technology is our inalienable right and we will not forsake such a right. The Isfahan issue is irrevocable.” This a reference to uranium conversion being resumed at the Isfahan plant. According to Larijani, “If the IAEA was seeking to resolve Iran’s nuclear issue, it could have already done so by now.”

Putin to the rescue?

The European view appears to be that Iran now is trying to split the international community by talking to other players like Italy, as well as members of the Non-Aligned Movement , such as India, Malaysia and South Africa. The fact is the international community is already split on the issue between the US and the EU-3 on one side, and most of the developing world on the other. As much as the EU-3 is accusing Iran of playing the 35 member countries of the IAEA Board of Governors against each other, the US is exercising tremendous pressure over these same countries to refer Iran to the Security Council for possible sanctions.

Former Iranian Foreign Minister Ali Akbar Velayati, currently a key advisor on foreign affairs to Supreme Leader Ayatollah Ali Khamenei, is quoted as saying that Iran now has the upper hand – and that’s the consensus in Tehran. Velayati is a realist. If Iran is referred to the Security Council, “They will obviously set a deadline for Iran, and in the worst circumstances we would have to expect sanctions.” Velayati thinks that both Russia and China may not veto the move for sanctions, “but they will try to moderate the Security Council’s stances.”

There are insistent rumors in diplomatic circles in Tehran that Italian Prime Minister Silvio Berlusconi has asked his close friend, Russian President Vladimir Putin, to intervene as the new broker of last resort – since the failure of the EU-3 strategy is now being widely acknowledged. Italy from the start wanted to be part of the negotiating team. Berlusconi believes that only Putin can bridge the gap between Western Europe and Iran as he is – relatively – trusted by both sides.

Russia said on Monday that it opposed sending Iran’s case to the Security Council.

The showdown is when the 35-member IAEA board meets on September 19 in its headquarters in Vienna. The US and the EU-3 know that both Russia and China – with multiple billion-dollar deals with Iran – would be inclined to block any eventual Security Council sanctions. Diplomats in Brussels realistically realize that sanctions would not be considered at first: the council instead would try hard to come up with a long-term “constructive” solution.

Deal? What deal?

The story of the EU-3’s mediation is a chronicle of a debacle foretold. In a nutshell, Iran voluntarily agreed under the Paris Agreement of November 2004 to suspend uranium enrichment at Isfahan as part of negotiations with the EU-3. The IAEA itself recognized the move as “a voluntary, non-legally binding, confidence-building measure.”

Five months ago, Iran actually proposed to freeze uranium enrichment but to keep a few centrifuges (under severe IAEA inspections). The EU-3 rejected the offer. Why? Because of Washington. From the Bush administration’s point of view, Iran has the right to nothing – much less to master parts of the fuel cycle.

Iranian negotiators saw through the EU-3 strategy from the start. They accused the EU-3 of trying to maintain the suspension of uranium enrichment “indefinitely” and at the same time obstructing any significant development in the negotiations. That was exactly the case, because Washington had blocked any possibility of a compromise. Iran has the right to work on a nuclear fuel cycle according to the NPT, and it has the right to keep at least a pilot enrichment program. In Tehran’s view, the EU-3, pressured by Washington, was in fact trying to impose no uranium enrichment and no reprocessing.

The EU-3 had nothing to offer except a heavily spun “nuclear, commercial and political package,” as it was advertised in Brussels. An iron rule in the package was for Tehran to definitively renounce uranium enrichment. For Tehran, conversion is not enrichment, thus the restart of Isfahan’s plant.

The EU-3 package was in fact a very limited – and conditional – one. It offered a guaranteed supply of fuel for Iran’s civilian reactors, as long as they were fully supervised by the IAEA; an agreement (but only in principle) for European companies to build a nuclear power station besides the Russian-made Bushehr reactor, but as long as Tehran allowed extremely intrusive IAEA inspections (and even this wouldn’t fly if Washington actively blocked it); more trade (including conditional access to the World Trade Organization) and economic cooperation; sales of Airbus planes; and vague support in terms of “security cooperation” on energy matters, Iraq and Afghanistan, as well as the fight against terrorism and drug trafficking.

Last month in Brussels, some European diplomats, off the record, admitted to Asia Times Online that the package was “an empty box of chocolates.” But “there is nothing else we can offer,” a diplomat said. “The Americans simply wouldn’t let us.” The diplomats also confirmed that both France and Germany were absolutely ready for a deal, considering they want to invest heavily in Iran, and want to close oil and gas agreements. The problem was Britain. “We know,” said officials in Tehran, barely disguising their smiles.

Tehran was incensed not only by the terms of the package but by the way it was presented – a bureaucratic letter with no official signature by any of the EU-3 foreign ministers. The conditional offers were only on Europe’s name, and did not implicate the US. That was the last straw. Iran called the EU-3’s bluff and resumed uranium conversion at Isfahan. That led to last Saturday’s IAEA report.

The report says many important things. Crucially, ElBaradei acknowledges that Iran is cooperating with the IAEA. And he admits that results of extensive analysis tend to support Iran’s official statement about the foreign origin (from Pakistan) of uranium contamination.

ElBaradei also says that Iran has been asked to provide more information regarding its P-2 centrifuge program. He says a final assessment of Iran’s plutonium research activities must await the results of more analysis. He says that Iran is building a heavy water research reactor at Arak (planned to start in 2014) and a heavy water production plant at Arak as well. He says Iran’s heavy water reactor program will be monitored by the IAEA.

But ElBaradei also criticizes Iran for not reporting to the IAEA all its experiments in uranium enrichment, uranium conversion and plutonium research. He adds, however, that Iran has agreed to provide further supporting information and documentation. He says that after two-and-a-half years of intensive inspections and investigations the IAEA is not yet in a position to clarify some important outstanding issues; and he calls for Iran’s “full transparency.” In essence: the tone is “let’s keep talking,” not “let’s shut the door.”

Courting India

Larijani insists that “we did not stop the talks, they [the EU-3] did. We consider negotiations with every country as useful. We have not hidden anything. They must know that threats would not have any effect on our national will.”

Tehran’s new global diplomatic thrust is now evident. The strategy insists on Iran’s inalienable nuclear rights according to the IAEA charter; stresses a close, respectful cooperation with IAEA inspectors; and actively courts support from non-aligned countries like India, Malaysia and South Africa (that’s the spirit of Larijani’s high profile visit to India last week). As far as Tehran is concerned, the EU-3 are now history. Unless they table a realistic proposal.

Tehran stresses that both Israel and Pakistan totally ignored the NPT and built their own nuclear weapons, without giving any explanation to the “international community.” So why should Iran be punished when it is actually complying with the NPT?

The Isfahan plant will keep working on uranium conversion. And Tehran plans to resume uranium enrichment at Natanz as well. There’s nothing the EU-3 can do about it. According to an Iranian diplomat, “The IAEA of course can talk about their ‘serious concern’ about nuclear activities in Isfahan and Natanz, but they cannot use this legally as a means to refer Iran to the UN Security Council.” Or can they?