Where we are now is Iran is preparing for a confrontation with the United States that it expects to win and in doing so humiliate the West, especially the United States.
The message Iran sent with its over-reaction to the IAEA report (the announcement that it plans to make 10 enrichment facilities, all underground) is that it is preparing to dash ahead in its nuclear program - not to build a weapon but to develop an unpreventable nuclear weapons capacity as soon as any new UN sanctions are passed or there is any significant change in the current sanctions structure. At the same time, Iran is leaving the US in a position that its credibility, as well as pressures from Israel, require it to change the current sanctions structure.
My best guess as to what happened earlier this year is as follows:
While the US has publicly retained the George W. Bush formulation that Iran must comply with its "international obligations", which effectively means the UN Security Council resolutions demanding that Iran suspend enrichment, it has indicated in private channels that there is some flexibility on that matter.
A detour into "international obligations". The story with the Security Council resolutions is that in 2003, Iran agreed to what the IAEA described as "voluntary and non-legally binding" confidence-building measures. The NPT and safeguards agreement that Iran ratified describes the process to be followed if fissile material - thorium, uranium or plutonium - is detected that has not been reported according to the agreement. The process, according to the written rules, does not require suspension of any nuclear activities and does not require a country to take on new obligations.
As a voluntary measure, Iran began to implement the Additional Protocols - which put obligations on a country beyond those of the NPT and safeguards agreements. Implementation of the Additional Protocols allows the IAEA to make a stronger declaration about the absence of a nuclear weapons program than is required or possible under the NPT and safeguards agreements that Iran actually ratified.
The IAEA, in order to make the strongest possible declaration of lack of a possible nuclear weapons program, would require cooperation with Iran even beyond that described in the Additional Protocols. The IAEA requested, on a voluntary and non-legally binding basis, that Iran offer the cooperation necessary to make the strongest possible declaration that Iran has no nuclear program, that Iran ratify the Additional Protocols and further that Iran suspend aspects of its nuclear program such as enrichment until the IAEA has time, possibly measured in decades, to declare that all possible investigation into any weapons program in Iran has been exhausted and there is no potential weapons program.
The Security Council in 2006 made these voluntary and non-legally binding measures into "international obligations" for Iran. Either such an action by the Security Council is legal or it is not. If it is legal, states have no sovereignty that is to be respected before the UN Security Council. The Security Council has demanded Iran ratify a specific treaty. There really is no sovereign right more fundamental than the right to determine which treaties a country ratifies. If this is legal, the UN Security Council also has the power to demand that Iran cede the municipal area of Tehran to Israel. If there are limits at all to the scope of the Security Council's authority to infringe on the sovereignty of member states, the nuclear resolutions regarding Iran cross those limits.
If, as is commonly held in UNSC veto-wielding countries, there is no limit to the authority of the UN Security Council over the sovereignty of UN member nations then Iran's position is that on sovereignty grounds and national defense grounds, it will ignore the resolutions despite that behavior being illegal. Iran also describes as hypocritical the failure of the Security Council's unlimited authority to force, for example, Israel to sign and ratify the NPT itself, or to provide maps of cluster bomb fields in Lebanon currently killing Lebanese civilians, or to cease restricting the access to food of civilians in Gaza, which is a war crime.
But the Bush and Obama administrations prefer the more vague term "international obligations" to "Security Council resolutions", probably because the second term is more transparently political, and highlights the true but inconvenient fact that before those resolutions, the steps being asked of Iran were voluntary ones that Iran had every right to refuse.
And now another detour into "national defense grounds." The NPT requires its signatories not to build, manufacture or acquire nuclear weapons. The NPT is nearly silent on the issue of the technologies underlying nuclear weapons. Nearly silent, but not quite silent. The NPT expressly holds that the right to technology, outside of building actual nuclear weapons, is a sovereign right that does not come from the NPT, and the NPT does not limit every nations right to that technology "without discrimination". If Iran does not build an actual weapon, it has as much right to enrichment technology as Brazil. It has a much right to be nuclear capable as Japan. There is no requirement that Iran take voluntary confidence-building measures to have the same capacity as Japan or Brazil.
From time to time I come across an assertion that Japan is not weapons capable because it does not have a stockpile of uranium. Anyone who knows enough about Japan's program to specify that it does not have uranium also knows that Japan has over 60 tons of plutonium, which could make over 10,000 nuclear warheads. Japan is clearly nuclear weapons capable, and has stockpiled material that serves to guarantee its nuclear capability. Assertions to the contrary are deliberate deception. It's annoying to be directly lied to but you see it a lot when discussing the Middle East with Westerners.
If a country like Iran does not build a weapon, there are degrees of confidence its potential adversaries may have that if alerted, they could prevent the non-nuclear country from building a weapon. Today, Iran's uranium stockpile and most of its assembled centrifuges are in a single, relatively vulnerable location. Iran could in some scenarios build a weapon in a moderate amount of time, but the US is confident it could, in the short term prevent it.
As Iran's stockpile increases, and its number of locations with already assembled centrifuges and stockpiles of uranium increases, the US loses confidence that, if it chooses, it can prevent Iran from building a weapon. There is an important barrier between "we probably could stop a rapid drive for a weapon" and "we do not have confidence that we could, through military means, prevent a dash to a weapon".
Iran has not crossed that barrier yet. An US analyst today can claim that "In the race between an Iranian bomb and bombing Iran, we would win, we would cave in the roof before they got a bomb’s worth of material." Iran will gain real strategic benefits from rendering the US unable to confidently make that statement. Once the US can no longer make that statement, the defenseless position Iraq was forced into before the US in 2003 will never have to be endured by Iran.
Now the detours are over, we're back to the story of negotiations this year. The deal that was made public was a poor deal for Iran. Iran ships its uranium overseas and then waits at least a year for fuel to return for its medical reactor in Tehran. Of course the West would withhold the return of the fuel until Iran suspends enrichment entirely. Why would it not? The US public position is that Iran must comply with its "international obligations." The deal as presented to the public gives the US another lever of pressure to attempt to force Iran to do just that.
Because there was Iranian support for the deal when it was first announced, and also because El Baradei, who if nothing else understands that Iran does not intend to stop enrichment clearly had hope that Iran would accept this deal, I'm fairly certain that in private there were details that made the deal far more favorable to Iran.
One possible scenario is that this was envisioned as the first step in a multi-step process. The first step would be that Iran, using the pretext of the medical reactor, ships enough fuel overseas to have an agreed amount of less than one ton on hand. Next Iran would be presented with an invitation to commit its nuclear facilities to an international fuel bank - that ships its output overseas, maybe even to Turkey for storage, but its nuclear facilities would remain on Iranian soil under joint management, maybe with the Russians. Iranian enriched fuel could be added to other fuel in this scenario to actually help fuel Bushehr, which would come on line rapidly after the deal is accepted.
Possibly, there could even be a "retooling period" during which Iran would not be enriching uranium and the US could declare that the Security Council requirement that Iran suspend enrichment has been satisfied.
What this deal would have done is slowed Iran's move from a theoretical nuclear weapons capacity to a theoretical militarily unpreventable nuclear weapons capacity. Under this deal, in an emergency Iran would have to assemble an entire plant new, and then start enriching uranium from a very small pre-enriched stock. But this deal would have allowed Iran to move past this crisis with its dignity intact and with both domestic enrichment and a nuclear weapons capability that though modest, could be steadily if slowly built up outside of its current sanctions regime.
Most of the deal is private. I don't know what US negotiators have been talking about with Iranian negotiators at least since when they began coordinating on the idea of a fuel transfer earlier in 2009. I do know that the complete deal is more favorable to Iran that what has been released and that it has to include an element of Iranian allowed domestic enrichment or Iran would not have talked at all.
Whatever the deal was, it broke down in October. I blame the Balochistan attack. Israel, at least in early October did not approve of the US giving up on its zero enrichment stance. Possibly more pro-Israel elements of the Western coalition, even within the US, indicated that the West might renege on any later stages of the deal once the uranium had left Iran. More important though, for the first time in decades, high ranking Iranian officers were killed in Iran. That had to shake the Iranians up.
A lot happens behind the scenes. I can only assume that the US is competent enough at diplomacy that it has discussed with the Iranians ways to defuse the anger over Balochistan, and there is nothing the US can do that would be sufficient to put the parties into the positions they were in on October 1.
Now that the deal has broken down, it is possible that Iran has permanently taken a preventable nuclear weapons capacity off of the table. Once sanctions come, if they come as a single name added to the list or as a full gasoline embargo, Iran will break the freeze for freeze that has been informally followed by both sides since late at least 2008 and fairly quickly double its production of enriched uranium.
Iran currently enriches about a ton of LEU per year. Under perfect conditions, a ton is enough to build a weapon, more realistically a safer estimate may be two tons of LEU per weapon. Iran has enough high quality imported yellowcake to make about 12 tons of LEU. By the end of Obama's first term, at today's pace, Iran will have four tons of LEU. If we get sanctions this year, Iran will increase its rate so that it has six or more tons by that time, also in better defended locations.
By the end of Obama's first term, the claim that the US would win a race against Iran's nuclear program will be false. Iran will have some confidence that even if the US attacks its nuclear program, enough will survive to still amass the HEU for a weapon in a matter of months.
Iran intends to harden its nuclear program and disperse it so that the US will not be able to bomb it. Iran still does not need an actual weapon, but it is within its rights to have to option to build one. What Iran having that option means is that, if there is a scenario in which the US wants to mass troops in a neighboring country the way it massed in Kuwait in anticipation of an attack on Iraq earlier, that threat that Iran would be able to build a nuclear weapon that would prevent any of Iran's neighbors from agreeing to host.
Also if Israel attempts to force a mass expulsion of Palestinians from the occupied territories, the fact that Israel has a nuclear monopoly means its neighbors ultimately do not effectively have a choice but to accept more refugees. If Iran has a nuclear capacity that cannot be bombed, it can counter any threat Israel could deliver to Cairo, Damascus or Beirut, which gives Egypt, Syria and Lebanon more room for maneuver in dealing with Israel.
The sense I get from Iran today is that either the US will completely back down in a humiliating fashion or Iran will acquire an unpreventable nuclear weapons capability relatively quickly, and Iran is willing to endure sanctions to do so. We have arrived at the day that one way or another, Iran will certainly in the short term have the ability, if it chooses and regardless of any action by the US or Israel, to build a nuclear weapon.
