Financial Times (London, England)

May 27, 2005 Friday
London Edition 1

SECTION: INTERNATIONAL ECONOMY; Pg. 10

LENGTH: 469 words

HEADLINE: US agrees to Iran WTO membership talks

BYLINE: By GUY DINMORE and DANIEL DOMBEY

DATELINE: BRUSSELS, WASHINGTON and GENEVA

BODY:


The US threw a lifeline to Europe's attempts to keep negotiations alive over Iran's nuclear programme, diplomats said yesterday, by giving a green light to Tehran's bid to start World Trade Organisation membership talks.

Iran's membership talks, formally approved by the Geneva-based trade body yesterday, were described as part of a broader deal securing the continuation of the European Union's talks on containing Iran's nuclear programme.

During an EU-Iranian meeting in Geneva this week, the British delegation, led by Jack Straw, foreign secretary, made last-minute phone calls to convince Washington that it was important to maintain a common front towards Tehran.

"It was a last-minute thing that could have broken down if the Americans had stepped back (from their commitment on the WTO)," one diplomat told the Financial Times.

After the US confirmed that it would lift its perennial veto on WTO accession talks, Tehran agreed to maintain a freeze on its nuclear programme until early August, by which time France, Germany and the UK will produce new proposals for a settlement.

Washington had in recent days declined to confirm it would immediately carry out a promise made in March to lift its WTO veto on Iran.

One possible explanation was that the US, which believes Iran wants to build a nuclear weapon, feared the Europeans would give away too much to Tehran, which insists that its nuclear programme is peaceful.

Some senior US officials still worry that the Europeans' fallback position in the negotiations could be considerably more lenient than their formal position and allow the Iranians to resume the production of uranium hexafluoride gas - an initial step in the nuclear fuel cycle.

Iran now faces at least five years of negotiations before it can join the WTO. Russia and Saudi Arabia, the two biggest economies currently outside the WTO, have been negotiating for a decade.

Apart from making changes in domestic rules to comply with WTO rules, Tehran will have to negotiate bilateral agreements with any member who requests it, giving the US another opportunity to hold up Iranian accession if it wishes.

The EU has also resumed talks on a trade and co-operation agreement, which could help Tehran prepare for WTO accession, although progress in these negotiations has been slow.

Iran, like other Middle East oil producers, is seeking to diversify its economy. But as long as it remains outside the WTO its manufacturers risk higher tariffs on their products than rivals in member countries.

At present, apart from oil, Iran's main exports are steel and other metals, pistachios, petrochemicals and carpets.

But membership will also require Iran to open up its economy to foreign goods and services, a move that could put a painful squeeze on uncompetitive producers. See Editorial Comment www.ft.com/iran

LOAD-DATE: May 26, 2005