West unlikely to offer immediate sanctions relief in Iran talks

Iran's President Hassan Rouhani takes questions from journalists past a bouquet of flowers at a news conference in New York September 27, 2013. REUTERS/Adrees Latif

By Justyna Pawlak BRUSSELS (Reuters) - With a week until negotiations over Iran's nuclear program resume in Geneva, Western diplomats are playing down any suggestion that Iran's new openness on the world stage will result in any immediate or broad loosening of sanctions. At the same time, they hope a new tone is being established and that the talks on October 15-16 will at last deliver an opportunity to make progress on ending the decade-long dispute over Tehran's nuclear program. Senior officials from the United States and Europe have said repeatedly they are not ready to offer any concessions until Iran takes concrete steps to allay their concerns that the program is ultimately designed to develop atomic weapons. Iran, meanwhile, has lost no opportunity under new President Hassan Rouhani to reiterate that it has only peaceful nuclear aims and to call for an end to sanctions on its oil and banking industries, which have caused a precipitous currency devaluation and cut oil export revenue by billions of dollars. While the atmospherics may be improving, negotiators from Britain, Germany, France, Russia, China and the United States will arrive in Geneva with little more than what they have put on the table in meetings over the past 19 months, diplomats familiar with the planning say. "There is a risk we get carried away by the positive atmosphere," one Western diplomat with close knowledge of the negotiations told Reuters, speaking on condition of anonymity. "We've had our first ceremonial meeting. Now we will be holding one on substance and their ideas," he said, referring to a meeting between Iranian Foreign Minister Mohammad Javad Zarif and international negotiators during last month's United Nations General Assembly in New York. Negotiators from the six nations - the five permanent members of the U.N. Security Council and Germany - have in the past asked Iran to address their most pressing concern, the enrichment of uranium to 20 percent fissile purity, as an initial step towards building confidence after decades of mistrust. In return they had offered relief from sanctions on trade in gold and petrochemicals, a proposal Iran rejected as too weak. A lack of new proposals would disappoint Iranian negotiators. Zarif made that clear on Sunday, telling Iranian state television the previous offer by the Western countries "belongs to history" and calling for fresh concessions. NUANCE The West is mindful that standing down on economic pressure would likely anger Israel, which sees Iran as an existential threat and has said it will attack Tehran's nuclear facilities if diplomacy fails to rein in the nuclear program. But for all the tough language on what the West wants Iran to do, diplomats are also signaling some flexibility. The lead U.S. negotiator, Wendy Sherman, held out the possibility last week of giving Iran some short-term sanctions relief in return for concrete steps to slow uranium enrichment. There was no more detail, and she did say fundamental sanctions - which Iran considers to be those targeting its banking and oil sectors - will remain in place until all of Washington's concerns have been addressed. Other Western diplomats say their previous offer to Iran should be seen as a basis for future discussions, but could be built on or "amplified", in the words of one, depending on the extent to which Iran is willing to compromise. "The buzz word will be adaptability. We are not going in (to Geneva) with a revised confidence building measure," another Western diplomat said. "We are going in there looking to get a proper response from Iran on what was presented in the past." "There needs to be flexibility and adaptability in the way we pursue it if they come with a credible response." In a sign of improving relations, Britain said it and Iran had begun a process that could lead to the reopening of their embassies, which were closed after the British mission in Tehran was ransacked in 2011. But Britain said any move on sanctions would require substantive changes to Iran's nuclear program. Over the past two years, Iran has been asked to stop production of 20-percent uranium, ship its existing stockpiles out of the country and shutter a facility buried deep underground where the enrichment work is done. The 20-percent threshold is a core concern because that level of fissile purity marks an important technological step on the way to producing the fuel needed for a bomb. Beyond that concern, Iran could also offer concessions related to its various nuclear or military facilities, such as the Parchin military base where the West suspects Iran carried out nuclear-related explosives tests a decade ago. Also closely watched is the Arak nuclear reactor, which could yield plutonium for nuclear bombs once it comes on stream. And Iran's stockpile and production of lower-level uranium, which can be used to produce fuel for nuclear power plants but also enriched further, may be capped to allay other concerns. Such steps could win it some sanctions relief, experts say. There is a good chance that the six powers will be prepared to consider lifting temporarily sanctions in other areas than they have previously done, said Jamie Ingram, Middle East analyst at IHS Global Insight, a consultancy. To achieve broader relief, Iran would likely have to abandon any enrichment to levels higher than 5 percent but could be allowed to keep some lower-level enrichment activity as part of a broader political settlement, as long as U.N. inspectors were allowed sufficient oversight powers. Such work is now prohibited under a series of U.N. Security Council resolutions calling on Iran to suspend any enrichment. A series of caps would also likely be imposed on the exact level of production, stockpile of any nuclear material and existing or future enrichment equipment, some diplomats say. "I think that within the (six powers) there is going to be a lot of internal discussions going on now about whether they should offer greater concessions," said Ingram. "Obviously this should be on the proviso that Iran itself offers greater concessions." (Additional report by Fredrik Dahl in Vienna, Louis Charbonneau in New York and John Irish in Paris; Editing by Giles Elgood)