By Louis Charbonneau

Reuters - As Iran pursues a nuclear programme the West fears is aimed at producing bombs, Tehran also appears to be stepping up development of missiles capable of carrying atomic warheads, diplomats citing intelligence say.

According to an intelligence report given to Reuters by a non-U.S. diplomat, a covert Iranian programme run by people closely linked to Iran's military includes plans to arm its Shahab-3 missiles, which experts believe have a maximum range of around 2,000 km (1,240 miles), with nuclear warheads.

The report, which could not be independently confirmed, surfaced as the United States and its allies seek to highlight the potential security dangers of a nuclear-armed Iran.

The report said it was code-named Project 111 and that the "aim is arming Shahab-3 missiles with nuclear warheads".

An Iranian official, who asked not to be named, denied the charge.

The assessment that Iran has nuclear ambitions for the Shahab-3 is shared by the European Union, Washington and Israel, said an EU diplomat who asked not to be named.

Tehran says it only wants nuclear power stations, not bombs. After three years of inquiries, U.N. inspectors have been unable to verify that Tehran's nuclear programme is purely peaceful.

An Iranian exile who has reported accurately on Tehran's nuclear programme in the past said Iran had significantly increased production of Shahab-3 missiles.

The International Atomic Energy Agency's board of governors met in Vienna on Monday to consider the latest IAEA report on Iran's nuclear programme. It will be sent to the U.N. Security Council, which could impose sanctions on Iran.

Project 111 was first mentioned last month in a report by the Washington Post, which described it as "a nuclear research effort that includes work on missile development". The Post said U.S. officials believe it is the successor of Project 110, which they believe is the military arm of Iran's atomic programme.

GERMANY WARNS COMPANIES

German intelligence officials believe Iran has stepped up covert efforts to procure missile technology, said a German government official, who asked not to be named.

The intelligence officials are sending "early-warning letters" to German firms, urging them to be alert for Iranian agents hunting for missile technology, he said.

German authorities have detained several Germans and at least one foreigner as part of a series of investigations of suspected attempts to purchase missile and other arms technology in Germany on behalf of Iranian intelligence, the official said.

Iran has repeatedly warned it would not hesitate to deploy the Shahab-3 missiles, which can reach Israel and U.S. military bases in the Gulf, if it comes under attack.

Material recovered by U.S. intelligence from a stolen laptop computer also suggests Iranian missile experts have been trying to develop a missile re-entry vehicle capable of carrying a relatively small nuclear warhead, EU diplomats have said.

But David Albright, a former U.N. weapons inspector and head of a U.S.-based think-tank, cautioned that however credible, all this intelligence is based on assessments, not certainty.

"I don't think any of the available intelligence represents a smoking gun," Albright said.

His Institute for Science and International Security estimates that Iran could not produce a bomb before 2009.

Alireza Jafarzadeh, an Iranian exile who heads a think-tank in Washington, told Reuters Tehran had sharply accelerated production of Shahab-3 missiles to around 90 a year from 15-20.

Jafarzadeh, formerly a spokesman for the National Council of Resistance in Iran (NCRI), listed by Washington as a terrorist organisation, revealed the existence of Iran's secret uranium enrichment plant at Natanz and other sites in August 2002.

North Korea has also been key to Iran's missile development.

Last month a German diplomat, citing his country's intelligence, confirmed a German newspaper report from December that said Iran had purchased 18 disassembled BM-25 mobile missiles with a range of around 2,500 km from North Korea.

The NCRI said at a news conference in London on Monday that Iran was also working on developing so-called Ghadr missiles, with a range of up to 3,000 km. Unlike the Shahab, which is based on North Korean Nodong missile technology, the Ghadr missile is based neither on North Korean or Russian designs.

No comment from Iran was immediately available. (Additional reporting by Gideon Long in London and Parisa Hafezi in Vienna)

Agence France Presse - The People's Mujahedin of Iran (PMOI), a branch of the country's exiled opposition, called Monday for the UN Security Council to intervene urgently in the controversy over Iranian nuclear plans.

"We ask the International Atomic Energy Agency (IAEA) to take a firm position on the Iran nuclear file and refer immediately to the UN Security council," said Firouz Mahvi, spokesman of the National Council of Resistance of Iran (NCRI), political wing of the PMOI.

Amid Western fears that Tehran is secretly working on making nuclear weapons, IAEA chief Mohamed ElBaradei said at the agency's headquarters here Monday he hoped an agreement could be reached soon to fears and avert punitive UN Security Council action.

As the IAEA opened a meeting here that could lead to international sanctions against Tehran, ElBaradei talked of a deal in around a week on the issue of Iran doing small-scale uranium enrichment.

But the Iranian opposition spokesman told AFP in the Viennese capital: "Iran is only buying time."
Some 150 opponents of the hardline regime of Iranian President Mahmoud Ahmadinejad demonstrated outside the UN offices in Vienna where the IAEA meeting was in progress.

"All the concessions with the mullahs have led to Ahmadinedjad at the top," the opposition spokesman said. "Iranian people don't want and don't need nuclear weapons and energy."

The NCRI has said previously a military option against Iran would be counter-productive, and has asked the European Union to withdraw the PMOI from its list of terrorist organizations.

Both the EU and the United States consider the PMOI a terrorist organization.

But the NCRI has in the past produced revelations about Iran's nuclear program. In 2002 it disclosed the existence of a uranium enrichment facility at Natanz, thus prompting an investigation by the UN nuclear watchdog.

The Iran dossier was at the top of the agenda at the IAEA's 35-nation board of governors here.

A deal on small-scale enrichment, and a resumption of talks between Tehran and the Europeans, would effectively head off Security Council action.

But Ahmadinejad has vowed his country would not be bullied.

"If they want to put political pressure on us, our decisions and behaviour will be reconsidered," the official news agency IRNA quoted him as saying.

The Times

Foreign Editor's Briefing by Bronwen Maddox

WE HAVE been here before. But today there may finally be a dramatic step forward in the three-year battle to prise Iran away from its nuclear ambitions.

The board of the International Atomic Energy Agency (IAEA) meets today in Vienna to decide whether Iran should be hauled before the United Nations Security Council for refusing to abandon its nuclear programme. After all the “last chances” which the IAEA has given Iran, this one looks most worthy of the term.

Iran may finally have reached the end of the road after talks on Friday — called at Iran’s request — failed to make a breakthrough.

The so-called EU3 — Britain, France and Germany — rejected the “compromise” Tehran offered, although it signalled that it would use the weekend to explore with Russia whether any deal might still be done.

But that looked unlikely to yield anything acceptable to the US and Europe. For months, Russia had seemed to offer Iran the only way out of referral to New York.

It proposed doing the most controversial nuclear work on its territory, allowing Iran to run nuclear power stations but not to master the technology which could also give it weapons. But Iran insisted on holding on to “experimental” work — a condition unacceptable to the EU3.

The IAEA voted, at an emergency meeting in February, to press ahead with the referral to the Security Council, allowing a month’s delay to see how Iran would respond. “Not well enough”, appears to be the result of that experiment.

Gary Samore, a specialist on nuclear proliferation at the MacArthur Foundation in Chicago, said: “At this point it looks like Iran’s efforts to split the P5 [Britain, France, Germany, the US and Russia] have failed. So the board should be able to confirm the February IAEA resolution to toss the issue to New York.”

On Saturday, in Pakistan, President Bush said that he would no longer oppose a gas pipeline which Iran wants to build to India through Pakistan. It would give India gas and Pakistan transit fees.

He said that he wanted to make clear that the US’s dispute with Iran was over its 20-year covert nuclear programme, not its wider commercial activities.

Bush’s offer, very different from his unequivocally hostile attitude three years before, is a clever move.

It marks an attempt to explore whether Iran would be open to a deal — but also to court support from other countries if it is not.

If Iran were referred to the Security Council, what would happen next? European governments and the US have spent a lot of effort on this in the past month. The first step would be to press the Council for a resolution ordering Iran to stop uranium enrichment, the most controversial aspect of the work. It would also order Iran to comply with the IAEA’s “additional protocol” — allowing the agency’s inspectors to make short-notice visits to sites of their choosing.

In Samore’s view, if the Council did this, “presumably, Iran would reject the Security Council’s request. The Council would then need to consider how to enforce its authority, including political and economic sanctions. This would be a critical test of the Council’s ability to achieve non-proliferation objectives.”

Many have been sceptical of the Council’s ability to do that. But diplomats have drawn up a long list of options, beginning with “cultural” sanctions, such as stopping football-mad Iran competing in the World Cup or stopping its ambassadors from travelling. A ban on the sale of equipment for its oil industry would also be high on the list. Western diplomats have emphasised that the UN would never target ordinary Iranians through food or medicine sanctions.

Before the Iraq war the US moved briskly and impatiently through the process of getting UN approval — and failed. With Iran, it and Europe are moving extremely slowly, needing to build up support.

Today will show whether, after three years, they have got one stage further.

By Parisa Hafezi

VIENNA (Reuters) - Iran will not give up its nuclear research activities but may discuss the timing of uranium enrichment resumption in a compromise with the European powers, a senior Iranian security official said on Monday.

Deputy secretary of Iran's Supreme National Security Council Javad Vaeedi repeatedly said in an interview with Reuters that Iran would not change its mind about its research and development activities, which the West fears might be used to make atomic bombs.

"The Research and Development activities have started and it is irreversible," Vaeedi said ahead of a meeting by the International Atomic Energy Agency's (IAEA) board of governors to weigh a report on Iran's nuclear activity.

Western diplomats say Iran is still some way from being able to resume atomic fuel production on a commercial scale, but experts believe the devices used in research could produce enough material for a warhead within a year.

Vaeedi said Iran would never scrap its nuclear fuel cycle work but was prepared to reach an agreement over the resumption of uranium enrichment, including the timing of a resumption, the conditions and arrangements for international inspections.

"We are ready to make a compromise. We are here to reach a settlement," Vaeedi said.

But he said while Iran was ready to be flexible on timing, any delay would be brief.

Iran is under international pressure to fully suspend enrichment-related work to rebuild confidence and restart talks on trade incentives.

Iran was reported to the U.N. Security Council last month after failing to convince the international community that its nuclear programme will be used for peaceful purposes.

A diplomat involved in the talks said Iran had offered a one-year enrichment moratorium, but it was rejected by the Europeans who demanded a 10-year suspension.

"Iran is in a mood to compromise. It has offered a selective, voluntary, temporary and non-legally binding suspension," the diplomat, who asked not to be named, told Reuters.

"But Tehran wants to pursue its R& D activities with the use of 3,000 centrifuges. The timetable of the suspension can be negotiated, but not the number of the centrifuges."

IAEA MEETING

The West accuses Tehran of using a civilian nuclear programme as a front for weapons development. The U.N. Security Council, which has the authority to impose sanctions, is awaiting the outcome of Monday's IAEA's board of governors meeting before deciding what action to take.

Vaeedi warned over the consequences of sending Iran's nuclear dossier to the Security Council.

"It is the West's call. If they choose confrontation, then we will be ready for that as well," Vaeedi said.

"Shipping Iran's nuclear case will transform a political matter into a security one. Under such circumstances, Iran's reaction will then have to be in the same context."

Since being reported to the Security Council, Iranian officials had held talks with Russia and the "EU3" of Britain, France and Germany on how to allay fears about Iran's ambitions.

Vaeedi said Iran wanted to avoid involvement of the Security Council in Iran's nuclear case.

"It is in everybody's interest if it is avoided. Conveying Iran's case may harm Iran but it will certainly harm the others," Vaeedi said.

"If they try to push us into a corner, naturally we will do our utmost that this will not happen.

Vaeedi said Iran and the West shared common interest in the region. "Iran is an influential country in the Middle East. I hope they will not make a decision that can harm our common interests, including peace and stability, in the region," Vaeedi said.

U.S. and Iraqi officials often accuse non-Arab Iran of stirring up violence in Iraq but Iran blames Iraq's Arab neighbours of backing al Qaeda fighters in Iraq.