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Max Security Analysis Iran: June 20 IAEA report, indications of progress on contentious issues highlights adherence to agreements, effort to reach deadline June 29, 2014

Current Situation
On June 20, the International Atomic Energy Agency (IAEA) issued a report comprised of 14 points delineating Iranian adherence to the interim Joint Plan of Action (JPoA) signed between Iran and the P5+1 on November 24, 2013 and implemented on January 20. Key points include the following:
  • The IAEA states that Iran has not enriched uranium above five percent at its declared facilities.
  • Iran has completed the requisite dilution of half (104.56 of 209.1 kg) of its higher-level (20 percent) enriched uranium to five percent. It has also converted 100 kg into uranium oxide, leaving approximately 4.54 kg to be converted by the JPoA’s July 20 deadline.
  • There have been no “further advances” to Iran’s activities at the Fuel Enrichment Plant, the Fordow Fuel Enrichment Plant, or the Arak Heavy Water Plant.
  • Iran has also begun the commissioning of the “Enriched UO2 Powder Plant (EUPP)”, which will be utilized for converting uranium newly enriched to five percent during the six month interim period to oxide.
Meanwhile, reports indicate that the next round of high level talks between the P5+1 and Iran will extend over a two-week period from July 2-15 in Vienna, ahead of the July 20 deadline. This follows the previous round from June 16-20, also in Vienna.
  • In addition, according to reports from June 27, the UN Security Council’s Panel of Experts on Iran concluded that Iran was the source of a weapons shipment destined for Sudan and seized by Israel’s navy in the Red Sea in March in a Panamanian-flagged ship called the Klos C. The shipment reportedly included M302 rockets and fuses, 120 mm mortar shells, and 7.62 caliber ammunition. Reports indicate that the panel concluded that the shipment is a violation of UN Security Council Resolution 1747.

Assessments
  1. The most recent report underscores continued Iranian adherence to its nuclear agreements, including the JPoA and the November 11, 2013 agreement with the IAEA known as the “Framework for Cooperation”. In this context, a number of the measures in the June 20 report overlap with those required under the Framework for Cooperation. This includes point 11, which states that Iran has supplied information and “managed access” to facilities, including the Saghand Uranium Mine and Ardakan Uranium Production Plant, and were two of the seven “practical measures” agreed on with the IAEA on February 8-9.
  2. We continue to assess that Tehran’s adherence is connected to an interest in ending its isolation and improving its economy, which continues to struggle despite partial sanctions relief implemented under the JPoA, including on petrochemicals, precious metals, and the auto industry. In this context, while Iranian media reported on June 28 that inflation decreased by 2.2 percent for the Persian month corresponding to April 22-May 21, it remains high at approximately 26.2 percent. Despite Iranian President Hassan Rouhani’s June 14 claims that the “sanctions regime has been broken”, the interim period has indicated that, despite partial relief, the remaining sanctions continue to be enforced. This is underscored by reports from April that a number of insurance companies were issued subpoenas by New York’s financial industry regulator as part of an investigation into compliance with laws barring business with Iran. Similarly, also in April, Spanish authorities reportedly arrested four individuals on charges of attempting to export banned equipment to Iran. 
  3. Despite reports during and following the June round of talks indicating that progress has been made on key issues, disagreements remain on others. In this context, Iran has reportedly agreed to sanctions being gradually eased as the country complies with a final status agreement, rather than immediate removal as Tehran had previously requested. In addition, unconfirmed reports indicate that consensus may have been reached on the Fordow Fuel Enrichment Plant, an underground locale reportedly home to 3,000 centrifuges, which involves converting the venue into a research facility. This follows reports from June 11 that Tehran has offered to “redesign” the Arak Heavy Water Reactor. Ali Akbar Salehi, head of the Atomic Energy Organization of Iran (AEOI) told Iran’s official news agency that annual production of plutonium would be reduced from 9-10 kg to less than one. Moreover, Iran’s news agency reported on June 23 that, according to AEOI’s spokesperson, Tehran would be willing to accept the Non-Proliferation Treaty (NPT) Additional Protocols conditionally “in order to remove [P]5+1 concerns”. The protocols were added to the NPT in 1997 to increase safeguards and measures of inspection for the IAEA, with the goal of ensuring compliance and that NPT members would not attempt to pursue nuclear weapons. However, Iranian Foreign Minister Mohammed Javad Zarif later emphasized that no agreement on this issue had been reached.
  4. That said, there has been no indications of progress regarding the number of centrifuges Iran will be permitted under a final status deal. Reports indicate that the US and Iran differ by a number in the thousands, with Iran desiring capability of fueling future nuclear plants and the P5+1 aiming to limit Iran’s “breakout capability”. This refers to the amount of time Tehran could produce a sufficient amount of “bomb-grade” uranium. Similarly, reports indicate that contention remains regarding the length of the agreement, with the US pushing for a longer period and Iran preferring a shorter term, after which it would be treated as a regular signatory of the NPT. With this in mind, we assess that the two-week marathon session of talks planned for July 2 was scheduled to provide increased time for discussions, while highlighting the preference of both sides to reach a final status agreement by the July 20 deadline.
  5. Finally, we assess that, despite potential pressure from parties such as US Congress, the results of the UN expert panel are unlikely to significantly impact negotiations. In this context, while Iran’s actions violated the UN weapons embargo, the arms themselves were not nuclear-related. In addition, criticism of the country’s foreign policy, including its support of Syrian President Bashar al-Assad, the Lebanese-based Shiite group Hezbollah, and Gazan-based militants, have been ongoing since prior to the JPoA’s implementation. Such criticism, however, has not yet led to disruptions in talks. That said, it is likely that Western officials, particularly those from the US, will raise the issue of Iran’s noncompliance to the UN resolution in the coming weeks in order to appease domestic audiences and allies. Such parties will likely accuse the West of overlooking serious infractions in the interest of achieving a deal. We assess, however, that the issue will be raised in a separate forum from talks, while the severity of reactions will vary depending on whether a final status agreement is reached by July 20.