Iran to suspend uranium enrichment

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Iran Promises UN It Will Suspend Uranium Enrichment (Update2)

Nov. 15 (Bloomberg) -- Iran told the United Nations nuclear watchdog that it agreed to a European Union proposal to voluntarily stop uranium conversion starting Nov. 22, to ward off U.S. calls that the Islamic republic be subjected to sanctions by the UN Security Council.

Iran ``decided on a voluntary basis and as further confidence-building measures, to continue and extend its suspension to include all enrichment-related and reprocessing activities,'' the International Atomic Energy Agency said in a 28-page report obtained by Bloomberg News and to be presented to the agency's governors Nov. 25 in Vienna. ``Iran invited the Agency to verify this suspension starting from Nov. 22, 2004.''

Iran has been negotiating with diplomats from France, Germany and the U.K. for more than a year. The U.S. says Iran is converting uranium as part of a clandestine nuclear weapons program. Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries, says it needs to process the uranium for nuclear fuel to generate electricity.

Iran has made ``good progress'' since opening negotiations with the EU in letting IAEA inspectors verify the extent of its nuclear program, the agency said in the report. Before 2003, Iran was guilty of ``many breaches'' of its IAEA treaty obligations, according to the report.

Under the terms of its EU deal, Iran agreed to suspend ``any activity for undertaking plutonium separation,'' the IAEA said. Iran also said it will stop making and importing gas centrifuges and all conversion tests.

EU Trade

Iran's deal with the EU could strengthen trade ties between the regions worth $16 billion euros ($20.7 billion). In exchange for stopping uranium enrichment, the EU had been offering Iran civilian nuclear reactor technology and the removal of trade barriers.

``We appreciate any deal which is clear and accepted by the IAEA,'' said Klaus Friedrich, spokesman on export controls and the Middle East for Germany's machinery and engineering trade group, VDMA, in a telephone interview from Frankfurt. ``We hope that the threat of embargo is past us.''

Trade Surplus

Europe had a 2.3 billion-euro trade surplus with Iran at the end of 2003, according to EU statistics. Exports to Iran averaged 25 percent annual growth in the last four years. Machinery and mechanical appliances represent about half of all EU exports to Iran, or around 4.5 billion euros last year.

``From a machinery point of view Iran absorbs more German trade than India and is on the same level as Brazil, Canada and Mexico,'' Friedrich said.

Iran hasn't run a trade surplus with the EU since 2001, when it exported 186.3 million euros more goods than it absorbed. Oil and oil products last year represented almost 90 percent of Iran's exports to the EU, or around 6 billion euros.

``Iran's trade links are pretty undeveloped,'' said Fitch Ratings analyst James McCormack, who rates Iran ``B+ positive.'' Fitch also rates Indonesia and Turkey B+. ``An agreement might help at the margin but they still need a lot of investment to increase economic output,'' he said.

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