Reuters:Iran has formally withdrawn its demand to exempt sensitive research from a freeze of key parts of its nuclear programme -- a last-minute bid to remove the threat of U.N. economic sanctions, Western diplomats say. Reuters

By Louis Charbonneau

VIENNA - Iran has formally withdrawn its demand to exempt sensitive research from a freeze of key parts of its nuclear programme -- a last-minute bid to remove the threat of U.N. economic sanctions, Western diplomats say.

Iran's request to be permitted to operate 20 centrifuges, which enrich uranium for use as fuel in power plants or weapons, nearly wrecked an agreement it reached with the European Union to halt all work linked to making atomic fuel.

A diplomat close to the U.N. International Atomic Energy Agency told Reuters on Sunday: "The IAEA received a letter from Iran regarding the 20 centrifuges. It seems to cover all the elements and appears to be acceptable (to the EU)."

Details of the letter were not immediately available, but a Western diplomat in Vienna said it appeared to be enough to save Iran from the threat of a referral to the U.N. Security Council and possible economic sanctions.

The United States accuses Tehran of wanting to build a nuclear bomb. Iran, though oil-rich, says its nuclear programme is aimed solely at generating electricity.

It was unclear what France, Britain and Germany, the "Big Three" running the talks with Iran on behalf of the European Union, thought of Iran's concession.

Hossein Mousavian, the head of Iran's delegation to the IAEA board of governors, told the semi-official Mehr news agency that Iran had reached an accord with the EU.

"We have reached an agreement with the (IAEA) and also with London, Paris and Berlin," he was quoted as saying. "Iran requested the centrifuges will not be sealed off. But those centrifuges will be under the agency's surveillance."

One Western diplomat told Reuters the decision not to seal the centrifuges but to monitor them with surveillance cameras was a "face-saving mechanism" that would enable Tehran to say that it had not backed down on the issue of the 20 centrifuges.

MOUSAVIAN: EU RESOLUTION READY

Mousavian also said that the EU three now had a draft of a resolution that was to be put to the IAEA's 35-member board.

"I predict the three EU countries' resolution will be approved by the members of the board," Mousavian said.

The resolution, which has been softened at least twice to accomodate Iran's many demands, is intended to make Iran's voluntary freeze a binding commitment.

It was unclear whether the Europeans had caved in to some Iranian demands for the addition of some new language to the EU draft in exchange for Tehran's renunciation of the centrifuges. Tehran had wanted a clause guaranteeing its "right" to enrich uranium in the future, something the EU did not like.

A fundamental problem in the negotiations is that the EU wants the freeze, once implemented, to be transformed into a termination of Iran's enrichment programme. In exchange, the EU will offer Iran a package of political and economic incentives.

But the Iranians reject a termination of the programme, calling enrichment a sovereign right they will never abandon.

The EU trio first sought the enrichment freeze in October 2003 to try to allay fears that Iran was using its nuclear energy programme to develop bombs. But that deal fell apart when the Iranians resumed production of centrifuge components.

Western diplomats said that Washington believes Tehran cannot be trusted and was not happy with either the EU-Iran deal or the latest EU draft, but would make no attempt to block them.

"They're giving the EU enough rope to hang themselves," a non-U.S. Western diplomat told Reuters.

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