There is no easy way out of the Iranian nuclear dilemma. Iran, emboldened by the situation in Iraq and soaring oil prices, and animated by a combination of insecurity and assertive nationalism, insists on its right to develop full nuclear fuel cycle capability, including the ability to enrich uranium. Most other countries, while acknowledging to varying extents Iran’s right under the Nuclear Non-Proliferation Treaty (NPT) to acquire that capability for peaceful energy purposes, have a concern – reinforced by Iran’s lack of transparency in the past, continuing support for militant Middle East groups and incendiary presidential rhetoric – that once able to highly enrich uranium, it will be both able and tempted to build nuclear weapons.

But EU-led diplomacy so far has failed to persuade Iran to forego its fuel cycle ambitions; the UN Security Council seems unlikely to agree on sanctions strong enough to force it to do so; and preventive military force is both a dangerous and unproductive option.

Two possible scenarios remain, however, for a negotiated compromise. The first, and unquestionably more attractive for the international community, is a “zero enrichment” option: for Iran to agree to indefinitely relinquish its right to enrich uranium in return for guaranteed supply from an offshore source, along the lines proposed by Russia. Tehran, while not wholly rejecting offshore supply, has made clear its reluctance to embrace such a limitation as a long-term solution: for it to have any chance of acceptance, more incentives from the U.S. need to be on the table than at present.

If this option proves unachievable – as seems, regrettably, more likely than not – the only realistic remaining diplomatic option appears to be the “delayed limited enrichment” plan spelt out in this report. The wider international community, and the West in particular, would explicitly accept that Iran can not only produce peaceful nuclear energy but has the “right to enrich” domestically; in return, Iran would agree to a several-year delay in the commencement of its enrichment program, major limitations on its initial size and scope, and a highly intrusive inspections regime.

Both sides inevitably will protest that this plan goes too far – the West because it permits Tehran to eventually achieve full nuclear fuel cycle capability, with the risk in turn of breakout from the NPT and weapons acquisition, and Iran because it significantly delays and limits the development of that fuel cycle capability. But with significant carrots (particularly from the U.S.) and sticks (particularly from the EU) on the table – involving the appropriate application of sequenced incentives, backed by the prospect of strong and intelligently targeted sanctions – it is not impossible to envisage such a negotiation succeeding.

This proposed compromise should be compared neither to the fragile and unsustainable status quo, nor to some idealised end-state with which all sides might be totally comfortable. The more likely scenarios, if diplomacy fails, are for a rapid descent into an extremely unhealthy North Korea-like situation, with a wholly unsupervised nuclear program leading to the production of nuclear weapons and all the dangerously unpredictable regional consequences that might flow from that; or a perilous move to an Iraq-like preventive military strike, with even more far-reaching and alarming consequences both regionally and world-wide.

Brussels/Washington/Tehran, 23 February 2006