As Iran seems reluctant to freeze its nuclear activities in return for technological and economic incentives, Western powers are preparing a fourth round of sanctions. Rasha Saad reviews the latest developments In an initial response to the European Union package of incentives, Iran said on Tuesday it would continue enriching uranium. The Iranian reaction defies attempts by major powers to pressure Tehran into stopping work which the West alleges could lead to building a nuclear bomb. "We have repeatedly said that enrichment is our red line and we should enjoy this technology. The work will be continued," Deputy Foreign Minister Alireza Sheikhattar told reporters on Tuesday. The EU's top diplomat, Javier Solana, presented Tehran on Saturday with a package of economic benefits designed to persuade it to curb its nuclear work, and said Iran should stop enrichment during negotiations on the offer. According to reports, the deal offers talks on a package of technological and economic incentives, so long as Tehran suspends uranium enrichment activities, which the West fears the Islamic republic might use to make an atomic bomb. It recognises Iran's "right to develop research, production and use of nuclear energy for peaceful purposes" and offers support for the construction of light water reactors, help with supplying nuclear fuel and the normalisation of economic ties with the West. The incentive package agreed by the United States, Russia, China, Britain, France and Germany last month and delivered by Solana is a revised version of one rejected by Iran in 2006. Western powers have already warned Iran it will face more sanctions if it rejects the offer. Iran, however, has shown no sign it will change its position, and suggested it was in no hurry to respond to the incentives package, saying it is reviewing the offers. "We will give our answer as soon as possible. But we do not know exactly when it will be," said Sheikhattar. In fact, Iran is conditioning its response to the EU's package to how the West has responded to Tehran's own package. According to reports Solana heard this response in Tehran during his meetings last week from both Iranian Foreign Minister Manouchehr Mottaki and top nuclear envoy Said Jalili. Iran last month launched a package which it described as an all-embracing attempt to solve the problems of the world, including the nuclear crisis. It suggests setting up consortiums to enrich uranium, including in Iran. Tehran, as a signatory to the Non-Proliferation Treaty, insists it has every right to enrich uranium to manufacture fuel for future power plants and the UN Security Council has slapped three sets of sanctions on Tehran for its defiance. However Western powers are preparing yet another set of sanctions against Iran. British Prime Minister Gordon Brown said on Monday Europe would enact further sanctions against Iran. Trying to water down the Western threats, Solana said after a meeting of European Union foreign ministers in Luxembourg on Monday the EU had yet to decide on a new round of sanctions. Washington's European allies have been far more cautious on punishing Iran because of deep business and energy ties. But the planned oil and gas sanctions -- which are not yet final -- would strike directly at Iran's economic base and its plans to expand petroleum exports to Europe at a time of record-high prices. Brown warned that European nations will start the process of oil and gas sanctions if Iran continues to refuse to halt enriching uranium. "Action will start today in a new phase of sanctions on oil and gas," he said. But the scope of the expected EU sanctions is still unclear. European diplomats say some divisions remained among the 27-nation bloc about how vigorously to move against Iran's energy sectors. One concern is pushing oil prices even higher. Phil Flynn, analyst at Alaron Trading Corporation in Chicago, said sanctions could definitely push prices higher due to worries that Iran could retaliate by pulling oil off world markets or attempting to choke off the Strait of Hormuz. "The market gets nervous. They get worried about how Iran's going to respond," he said. Brown also said Britain will freeze the overseas assets of Iran's biggest bank, Bank Melli-- a separate and largely symbolic clampdown on the MidEast nation. He said that the EU would join in the freeze. In a pre-emptive move, Iran has reportedly withdrawn around $75 billion from Europe to prevent the assets from being blocked under the Western threats, an Iranian weekly stated. "Part of Iran's assets in European banks have been converted to gold and shares and another part has been transferred to Asian banks," said Mohsen Talaie, deputy foreign minister in charge of economic affairs. But aiming at Iran's vast oil and gas industries would be a much more significant blow than the banking sanctions. Iran's stumbling economy -- burdened by chronic inflation and unemployment -- desperately needs the foreign currency from its fuel exports, which are still weighted towards Western markets despite efforts to cater to growing Asian demand. At the same time, Iran relies on foreign investment and technology in its oil and gas fields. More than 80 per cent of Iran's revenues come from oil exports, and the country has the world's second largest gas reserves. "The sanctions are going to exact a lot of pressure and cost in Iran, but I'm not sure at this point that they will give up uranium enrichment," said Mehrzad Bouroujerdi, an Iranian affairs expert at Syracuse University. While Europe has moved to reduce its trade ties with Iran, Tehran remains a key trading partner. Germany alone did business worth about $5 billion last year and more than 1,000 firms are selling their products or services to Iran, some with government subsidies. Additionally, Europe's dependence on outside energy makes any attempt to strike hard at Iran's energy sector problematic. Europe is one of Iran's main export markets for crude oil, with firms such as TotalFinaElf, ENI and Statoil competing for development rights in Iranian oil fields. Ironically European nations are also trying to build a pipeline from the Caspian region to the EU as a way to reduce European dependence on Russian natural gas. They should decide who is the biggest threat first.
