IAEA cuts back aid projects in Iran in nuclear row

VIENNA (Reuters) - The U.N. nuclear agency has cut back almost half its aid projects in Iran to uphold U.N. sanctions imposed on Tehran over its disputed atomic energy programme, according to a report obtained by Reuters on Friday. 

Details of the cutback emerged shortly after Iran's chief nuclear negotiator cancelled a trip to a conference in Germany, where United Nations officials had hoped talks with European policymakers would win a breathing space in the atomic row. 

The flag of the International Atomic Energy Agency flies in front of the Vienna headquarters in this file photo. The UN nuclear agency has cut back almost half its aid projects in Iran to uphold U.N. sanctions imposed on Tehran over its disputed atomic energy programme, according to a report obtained by Reuters on Friday. (REUTERS/Heinz-Peter Bader)

The aid reduction, based on a review by International Atomic Energy Agency experts, will go for final approval to a March meeting of the IAEA's board of governors, where Western and developing states are split over how hard to crack down on Iran. 

"This is a substantial cut in the technical aid programme for Iran," said a senior U.N. official familiar with it. "It is a message of inducement to Iran to reconsider its course." 

Iran was hit with sanctions over its failure to prove to the IAEA that experimental efforts to enrich uranium are geared solely to generating electricity as it maintains. The West suspects Iran wants to produce fuel suitable for atom bombs. 

Of 55 IAEA technical aid projects in Iran, 10 were halted entirely and 12 partially blocked as they could violate the Dec. 23 Security Council sanctions resolution against Tehran. 

"No technical cooperation may be provided to Iran that relates to the proliferation of sensitive nuclear activities specified in the resolution", namely enrichment of uranium, fuel reprocessing or heavy water production, the IAEA review said. 

Projects stopped as a result of the U.N. watchdog's confidential reassessment, issued in the name of IAEA director Mohamed ElBaradei, related mainly to strategic nuclear power planning and generation of nuclear fuel. 

"CHAIN REACTION" FEARED 

The U.N. resolution bans transfers of sensitive nuclear materials and know-how to Iran as well as IAEA aid, traditionally given to bolster peaceful uses of nuclear energy, if it has any possible use in producing atomic fuel. 

IAEA projects in Iran have supported work on radio-pharmaceuticals and isotopes for medical care and agriculture, radioactive waste management, nuclear power planning and safety regulations, and training courses. 

How broadly to apply the definition of banned projects is the subject of a brewing battle between the West and developing states on the Vienna-based IAEA's 35-nation policymaking board. 

The cancellation of the trip to Germany by Iran's Ali Larijani dashed hopes for a quick return to diplomacy in the deepening row between Tehran and the West. 

"We have heard that Mr. Larijani will not be coming to the conference due to illness," said Horst Teltschik, chief organiser of the Munich Security Conference. 

Earlier, ElBaradei urged the two sides to avoid "an uncontrolled chain reaction" towards conflict and said he hoped a solution would be found at the Munich talks. 

German Foreign Ministry spokesman Martin Jaeger said the meeting with Larijani had been arranged with an eye to a Feb. 21 U.N. Security Council deadline for Iran to stop enriching uranium for nuclear fuel or risk broader financial sanctions. 

Larijani had been expected to meet with German and EU officials as well as ElBaradei. 

ElBaradei appealed to both sides to take a simultaneous "time out", with Tehran suspending efforts to produce nuclear fuel and major powers their steps to carry out sanctions. 

"There is an urgent need for creative diplomacy and leadership. A durable peaceful solution will not come through pressure only," ElBaradei said in an interview with Germany's Der Spiegel magazine released on Friday. 

"If we only focus on sanctions ... that confrontation (risks) ending in an uncontrolled chain reaction ... In the Middle East today, where it's like a ball of fire, you have to be very cautious," ElBaradei said. 

Iran has promised an announcement of "significant" nuclear progress on Sunday when it crowns 10 days of celebrations marking the anniversary of its 1979 Islamic revolution. 

Washington is building up forces in the Gulf but says it is committed to diplomacy and has no intention of invading Iran. 

(Additional reporting by Francois Murphy in Paris, Sophie Walker in London and Tom Armitage in Berlin)