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Iran Talks Must Yield a Deal Even Reagan Could Accept

April 11 (Bloomberg) -- Apologies to Ronald Reagan as we mangle his catchphrase, but what the U.S. and other world powers need to do in negotiations with Iran later this week is to “accept, but verify” an Iranian nuclear-fuel program that’s limited to producing low civilian-grade fuel.

Only the most reckless gambler would bet on a breakthrough in the talks, due to take place in Istanbul on April 14. Ten years of abject diplomatic failure, distrust and Iranian filibustering have fed a justifiable cynicism. Nor is an election year a good time to ask President Barack Obama to make the kinds of compromises that any negotiated deal would have to include.

Still, some important facts surrounding the nuclear debate have changed since the two sides last met -- disastrously --more than a year ago, again in Istanbul. Both Iran and the Obama administration should seize the opportunity to use these changes, because the alternatives to a deal are far worse.

The most important development is the pressure that harsh U.S.-led economic sanctions have placed on Iran, severely crimping the oil revenues on which the government budget relies and halving the real value of the currency. For the first time, Iran now faces clear and imminent costs and penalties should it refuse to engage with negotiators from the so-called P5+1 -- the U.S., Russia, China, France, the U.K. and Germany -- as it did last January. Were it not for the ramped-up sanctions, Iran would probably not have agreed to discuss its nuclear program this weekend at all.

The U.S. and the P5+1 meanwhile, also for the first time, will go into this weekend’s talks ready to drop the demand that Iran freeze all uranium enrichment, distinguishing instead between the low enriched fuel used for power generation, and higher grades of uranium that could be processed more quickly for use in a weapon.

To understand why these new facts might be important, it helps to remember how we got here. For the decade since Iran’s covert nuclear-fuel program was first exposed to the general public, diplomats have sought to span an unbridgeable divide: The goal of the U.S. and its European allies was to persuade Iran to abandon, or in more recent years to freeze, all enrichment of uranium, a process that can be used to make either civilian or weapons-grade fuel. Iran’s goal was to confirm its right to enrich uranium, enshrined in the Treaty on the Non-Proliferation of Nuclear Weapons, to which it’s a signatory. There wasn’t, in reality, a whole lot to talk about. To put it mildly, there was zero trust.

Instead, negotiators spent the years discussing so-called confidence-building measures, such as a temporary suspension of enrichment that Iran agreed to in 2004-2005, and a 2009 proposal to ship most of the country’s stock of enriched uranium abroad, in exchange for ready-made fuel rods. But these measures generally involved the Iranians making concessions aimed at slowing its enrichment program. With no significant penalty if they refused, after 2005 the Iranians just continued enriching.

So, we would rather not hear about any further confidence-building measures at the Istanbul talks. What’s needed now is an agreement that offers a better chance of stopping Iran from acquiring a bomb -- with lower risks of unintended consequences -- than military action.

A recent New York Times report suggests the U.S. and its allies will focus on getting Iran to halt the enrichment of uranium to 20 percent, the level required for a medical reactor in Tehran, and transferring out of the country the roughly 100 kilograms (220 pounds) of the fuel that Iran has already produced in exchange for ready-made fuel rods. An initial response from the Iranian Atomic Energy Organization head, Fereydoun Abbasi, suggests Iran could be open to such a deal.

This would be a concession on previous U.S. negotiating positions -- and our own previous recommendations -- as it would, in effect, allow Iran to go on enriching fuel for power generation at 3.5 percent to 5 percent. But the goal of ending all enrichment was to prevent Iran from mastering the technology that would allow it to create fuel for a bomb, should it decide to build one. That technology has been mastered and can’t be unlearned. Focusing instead on intrusive monitoring is the right move. Israeli Defense Minister Ehud Barak also endorsed the concession in a CNN interview last weekend, though he saw it as an initial step before returning to a demand for a total ban on enrichment.

To make this work, the P5+1 would need to demand Iran’s full implementation of the International Atomic Energy Agency’s additional protocols; comprehensive monitoring of all Iranian nuclear sites; and full cooperation with the IAEA in investigating unexplained evidence that suggests Iran sought to develop nuclear-weaponization technologies. Iran has repeatedly failed to live up to its legal duties in this area, utterly undermining trust in its claims to be running a purely civilian program. No deal is possible without Iran’s complete commitment to transparency.

But here comes the hard part: U.S. officials have also indicated they will demand the closure and dismantling of the enrichment facility Iran has built under a mountain near the city of Qom, in order to immunize its nuclear program against potential Israeli or U.S. air strikes. There’s no prospect that Iran would agree to the facility’s closure so long as the threat of attack persists. Provided the Qom facility is fully monitored by the IAEA, the site’s existence shouldn’t be allowed to obstruct a deal. Closure should be left to future negotiations, when the threat of attack may have been lifted and tensions with Israel reduced.

From Iran’s point of view, the purpose of making any concessions will be to get sanctions lifted. Any deal would have to involve a staged easing of sanctions that would progress in parallel with Iran’s carrying out the agreement. That could prove a hard sell to the U.S. Congress, which legislated some of the most important sanctions, and a week ago proposed to expand them further.

Congress shouldn’t use its sanctions to block a deal that the administration is ready to make. The purpose of sanctions, after all, is to be traded away to secure goals. If Republican legislators are worried that Obama may emerge with a diplomatic coup to boost support in November’s elections, they should relax. Any agreement will be a long time coming, and none that can be reached will make Obama look much like a victor.

Read more online from Bloomberg View.

Today’s highlights: The View editors on the similarities of the budget plans of President Barack Obama and Representative Paul Ryan. Clive Crook on why the Federal Reserve needs a new, simpler mandate. Margaret Carlson on why there always will be waste, fraud and abuse in government. Peter Orszag on how index funds are boosting aluminum prices. William Pesek on growth in the Philippines reducing the appeal of emigrating. Gary Shilling on why U.S. employment gains are linked to stagnating productivity and Bernard Donefer on the merits of high-frequency trading.

To contact the Bloomberg View editorial board: view@bloomberg.net.

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