Iran's insistence on continuing enrichment programme leaves international community guessing at the regime's intent.
On August 21, amid nationwide celebrations, Russian engineers started loading fuel into the Bushehr plant, Iran's controversial 1000MW nuclear power project located on the coast of the Persian Gulf. Once the required 80 tonnes of uranium fuel have been installed, Bushehr will come online this month, according to Iranian officials.
This moment has been long in the coming. Construction on the reactor was started in the 1975 by Siemens, who abandoned the project after the Shah's rule was replaced by the Islamic Republic in 1979. Work on the plant was resumed by Russia in 1995.
Bushehr has been at the centre of much controversy, based on the concerns of Western powers, and the US and Israel in particular, that Iran is pursuing a nuclear weapons programme. Only days before the commencement of the fuelling process, John Bolton, the former US envoy to the United Nations, seemed to implicitly endorse an Israeli air strike on the site, stating that without intervention, "Iran will achieve something that no other opponent of Israel, no other enemy of the United States in the Middle East really has and that is a functioning nuclear reactor."
In reality, the likelihood of an attack on Bushehr is remote, not only because there are more worthwhile targets to hit.
The fuelling process is being observed by the UN's International Atomic Energy Agency (IAEA), who will ensure that none of the fuel is being siphoned off for military purposes. In addition, Iran has signed a fuel repatriation agreement, which stipulates that spent uranium will be shipped back to Russia. With these precautions in place, Bushehr is unlikely to pose a significant proliferation risk.
Iran's hardline regime has insisted all along that its nuclear programme is of an entirely peaceful nature. Skeptics might find it hard to believe, but the rationale for nuclear energy is strong.
The regime, far from universally accepted since it usurped power from the Shah Reza Pahlavi in 1979, has been generously subsidising basic commodities, which include power and water, to prop up the country's ailing economy, undermined by the nepotism of the ruling elite and successive rounds of international sanctions. The mullah's will be loth to destabilise their rule by scrapping subsidies and are too entrenched in their international pariah status for the sanctions to be rescinded.
"Iran has been suffering from power shortages for years now. They do sit on big gas resources, but they haven't been able to develop them quickly enough to meet spiraling demand," says Sam Ciszuk, an energy analyst at IHS Global Insight.
This means that despite sitting on the fourth largest reserves of oil, and the second largest reserves in natural gas, Iran is experiencing a shortage of feedstock.
The problem is greatly exacerbated by the long standing sanctions imposed on the country, which have prevented the purchase of modern oil extraction equipment. Oil is the main source of revenue for the state. But many of the fields are old, and in the absence of modern equipment increasing amounts of gas are pumped into the ground to extract the oil, further depleting gas reserves. "Iran has come to a situation where they have to balance their needs, they can't meet all their gas needs, and keeping the oil production high is necessary for the state. So trying to produce power by other means makes economical sense to them," says Ciszuk.
Ambitious plans, limited means
Encouraged by its success with Bushehr, the regime's nuclear programme is nothing if not ambitious. Last month, Alaeddin Boroujerdi, the head of the Iranian parliament's Commission on National Security and Foreign Policy, told the state-run IRNA news agency that another 20 nuclear reactors are under construction. A total of 20.000MW are to be generated from nuclear power by 2025.
To ensure a steady supply of fuel, Iran will be expanding its uranium enrichment programme, according to Iran's Nuclear Energy Organisation chief Ali Akbar Salehi. The regime is currently pursuing an enrichment programme at a site in Natanz. According to Salehi, another 10 such sites are in the pipeline, and "the construction of one of these facilities will begin by the end of the (current Iranian) year (to March 2011) or the start of next year."
A week later, Iran's firebrand president Mahmoud Ahmadinejad signed the law that calls for continued enrichment of uranium to 20 percent level, reported the Iranian news agency IRNA.
But the regime's grand visions clash with its means. Having maneuvered itself even further into diplomatic isolation with its insistence on going ahead with the enrichment programme, Iran will be struggling to find a country or a company willing to provide the necessary expertise. Even Russia, having honoured its agreement over Bushehr, will not want to take up another such politically sensitive contract, believes Ciszuk.
Furthermore, the growing interest in the nuclear energy, across the region and worldwide, means that energy companies are in no rush to embroil themselves in risky business, says Holger Rogner, section head at the IAEA: "The market has turned from being a buyers to being a sellers market. And even companies that are still looking for contracts will give preference to politically safe projects over establishing themselves in Iran."
It is equally questionable whether Iran possesses the funds necessary to pursue the expansion, given that the sanctions and state subsidies are shrinking state coffers.
The only other way to gain access to the necessary technology is to reverse engineer Bushehr. But this process is time consuming, as well as expensive. "Even if they have the money, reverse engineering would take a very long time. A second nuclear power plant within 15 to 20 years time looks very hard to achieve, let alone a 20 000MW generation capacity. That looks very unrealistic for a good few decades," says Ciszuk.
A sober assessment of Iran's ability to expand on its nuclear energy capacities leads to the inevitable question: Why is the regime pushing ahead with its uranium enrichment programme when it will not be able to use the fuel for civilian use in nuclear reactors? "They haven't been able to answer that question favourably," says Ciszuk. By the time Iran is able to bring online another nuclear plant, the country will be host to a massive stockpile of enriched uranium. This has intensified suspicions about Iran's true intentions. Once the uranium enriched to 20 percent levels, turning it into weapons grade is a fairly uncomplicated process, according to Ciszuk. This has heightened speculation that Iran is secretly pursuing a weapons programme, even though, as Rogner says, "a smoking gun has not been found yet".
Rogner understands the international concerns, but can also see the logic to the Iranian point of view: "The Iranians will be saying ‘We don't even have access to spare parts for civilian purposes, so how can we expect to be confident in attaining the necessary fuel (for Bushehr)?' That's why they will want to be self-sufficient at all costs. Economically this doesn't make any sense, an enrichment plant only becomes viable at about 10 to 12 gigawatt of nuclear energy production capacity, but from an energy security point of view it does."
Nevertheless, as the enrichment programme continues, so does the threat of a military strike against Iran's nuclear installations. While Bushehr is an unlikely target, Israel or the United States could be tempted to strike at the enrichment facility at Nantanz.
Ciszuk believes this possibility to be remote, however. "The US is clearly not keen on it. They are keeping the threat alive, in order to provide a stick when it comes to negotiations. But it's a very tough thing to do and the fall out will be tremendous," he says. Those considerations will also encourage the US to restrain its regional ally Israel, which feels distinctly uneasy about the prospect of a nuclear armed Iran. Yet, it is doubtful whether Israel even has the capabilities to hit a heavily defended site at such a great distance.
While a military strike thus seems doubtful, the fourth round of sanctions imposed on Iran by the United Nations in June are very real.
One of the prime considerations of the sanctions was avoiding the mistakes of the UN sanctions against neighbouring Iraq in the 1900s, which not only failed to destablise Saddam Hussein's rule, but arguably strengthened his grip on power.
Consequently, the sanctions are far more tailored, and are a thorn in side of the regime. "They are quite crippling but not in an immediate way, which I think makes a lot of people say the they aren't working, " says Ciszuk. "But they are crippling, because the oil and gas industry has very big problems to get hold of modern technologies, and the Iranian oil and gas sector is aging, they do need a lot of enhanced oil recovery techniques, which raise production from mature and declining oil fields."
As the provision of cheap energy to the population is the economic foundation for the regime to survive, and a rapprochement with the west seems incompatible with its beliefs, the sanctions in many ways strengthen the case for continuing to go down the nuclear route in the mullah's eyes.
"They are struggling to get enough gas onstream, and have to prioritise between sending it to power plants and using it for oil production. That is creating a vicious circle, and forces a rationale for nuclear power plants," concludes Ciszuk.
With the regime strengthened after crushing the reformist movement in the wake of last year's contentious election, tensions in the region are unlikely to ease off any time soon.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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