By Kaveh L Afrasiabi

Days after announcing that Iran was willing to send its low-enriched uranium for further processing abroad, President Mahmud Ahmadinejad told the country’s Atomic Energy Agency to begin the enrichment process in the country. However, Ahmadinejad emphasized that Iran was still open to a “fuel-for-fuel” option.

The US and its allies now face a dilemma: they can go ahead with the fuel swap, or allow Iran to come near to the threshold of “weapons-capable” uranium enrichment – 20%. On October 1, the International Atomic Energy Agency proposed a plan under which Iran would send the bulk of its low-enriched uranium to a third country to be further enriched, then shipped back to Iran for use in a medical research reactor in Tehran. Should the West choose the fuel-swap option, it will likely need to accept less than the 1,200 kilograms of uranium originally stipulated by the (IAEA) plan and give Tehran guarantees of delivery.

Ahmadinejad’s two statements – on February 2 accepting the fuelswap, then on Sunday telling Iran’s nuclear agency to itself enrich the nuclear fuel for theTehran research reactor – seem contradictory. But from Tehran’s standpoint, one complements the other.

Above all, the aim is to increase Iran’s bargaining ability with respect to the IAEA-proposed deal. The net effect, some in Iran hope, will be to pressure the West to demonstrate a greater degree of flexibility and revise its present stubborn approach – of “either or”, to paraphrase Iran’s envoy to the United Nations, Mohammad Khazaee.

A number of foreign policy experts in Tehran were surprised at the lukewarm reaction to Ahmadinejad’s fuel offer in the West, recalling United States President Barack Obama’s enthusiastic endorsement of the deal last October. By signaling Iran’s determination to produce the nuclear fuel at home, Ahmadinejad may add fresh fuel to a US-led drive for greater sanctions on Iran.

On Saturday, Iranian Foreign Minister Manouchehr Mottaki met with the chief of the United Nations’ nuclear watchdog agency, Yukiya Amano, at the Munich Security Conference. But on Sunday, US Defense Secretary Robert Gates called for the international community to coordinate sanctions and pressure on Iran.

Ahmadinejad’s order to enrich nuclear fuel domestically is agamble that may backfire with China and Russia, which had welcomed his earlier announcement regarding the fuel swap. To reassure the rest of the world that Ahmadinejad’s initial offer was sincere, Iran will need to make a formal approach to the IAEA.

A sticking point may be Iranian insistence on a “simultaneous exchange” of nuclear fuel within Iranian territory. This was reiterated by Iran’s ambassador to Moscow, who has openly dismissed Western media reports that Ahmadinejad had consented to a “four or five months” time gap between export and import of the enriched uranium. (See Iran launches new phase in nuclear crisis, Asia Times Online, February 5, 2010).

The ultimate aim of Ahmadinejad’s intricate, dualistic diplomacy appears to be to secure the best deal for Iran. But this also raises the issue of Iran’s stark choices, since the nuclear fuel for the Tehran medical research reactor will soon run out, affecting the operation of some 200 hospitals which rely on its radioisotopes forcancer patients.

“Iran’s biggest challenge is technological because of some recent problems with the centrifuges [necessary for enriching uranium],” said a Tehran policy expert on the condition of anonymity. “If somehow Iran succeeds in meeting this challenge, then it would be cheaper, more efficient, and of course better for the country’s long-term interest not to be dependent on foreign sources.”

This argument makes sense, according to Western nuclear experts who point out that under present arrangements, Iran loses some 50% of a key isotope due to decay during shipment, and it costs a lot more to import than to produce locally.

The best option may be a “multi-nationalization” of Iran’s enrichment activity, meaning that the nation’s whole fuel cycle is based on a regional or multi-national approach, something that Iran’s officials have repeatedly welcomed.

In the coming days, sources in Tehran tell the author, Iran is likely to give its final response on the IAEA-proposed deal to the IAEA, and this might explain the behind-the-scenes meeting of Mottaki and IAEA chief Amano in Munich, which culminated in an optimistic statement from Mottaki.

“We discussed and exchanged views about a wide range of issues … We also exchanged views about the proposal that is on the table. I tried to explain the views of the Islamic republic of Iran for the director general,” said Mottaki.

It is unlikely that Mottaki would be up-beat if there was no momentum behind the deal, since the foreign minister’s reputation would no doubt suffer.

However, the biggest question mark hangs over Washington’s commitment to the fuel deal. Obama was enthusiastic about it four months ago, but since then a powerful chorus of voices – including some from within the Obama administration – has been raised against it. Secretary of State Hillary Clinton never displayed any genuine interest in the fuel swap, though she accused Iran of walking away from a good deal.

The threat of Iran embarking on its own enrichment drive may be just what Washington’s hawks need to accept the fuel-swap option. If they do not, and continue with military threats and coercive diplomacy, then they may have to deal with the unwanted consequences of escalating the Iran nuclear crisis at a time when the US – already bogged down in two of Iran’s neighbors – can ill afford such a prospect.

At a recent presentation to the US Congress, Dennis Blair, the head of US intelligence, said Iran had probably not yet decided to build nuclear weapons and was open to diplomatic influence from the West. That is a keen observation, and the US needs to take into consideration the ramifications of pushing Iran into a corner.

In other words, the US will likely prefer to strike a bargain with Iran than go to war with it. After all, Iran would not be breaching international obligations under the nuclear Non-Proliferation Treaty if it were to produce its own nuclear fuel for the Tehran reactor. Several other nations, such as Canada, import weapons-grade uranium for their research reactors.

“People in the West forget that Iran continues to have the plutonium that the US delivered to Iran in the late 1960s for this reactor in Tehran that is under IAEA safeguards. Iran’s record, which shows it has not misused this … is under appreciated,” the Tehran expert said.

Indeed, Tehran has been in possession of weapons-capable resources for many years without any report of diversion to weapons purposes, so why is there concern now? The answer may lie less with Iran’s nuclear intentions but with a US desire for power projection in the Middle East and Persian Gulf.

Kaveh L Afrasiabi, PhD, is the author of After Khomeini: New Directions in Iran’s Foreign Policy (Westview Press) . For his Wikipedia entry, click here. His latest book, Reading In Iran Foreign Policy After September 11 (BookSurge Publishing , October 23, 2008) is now available.