Iran won't use oil as weapon: Mottaki

Fri Mar 31, 5:33 PM ET

GENEVA (Reuters) - Iranian Foreign Minister Manouchehr Mottaki said on Friday that Tehran would not use oil as a weapon in the row over its nuclear program and was open to compromise, comments that caused the price of oil to plummet.

But the head of the U.N. nuclear watchdog, Mohamed ElBaradei, said it was up to the Iranians to create the conditions for a resumption of collapsed negotiations aimed at resolving its nuclear standoff with the West.

Mottaki stressed that Iran would not give up its right to develop nuclear energy for civilian use, which he said was enshrined in the nuclear Non-Proliferation Treaty (NPT).

"We're not going to use energy as a political leverage," Mottaki told reporters in Geneva, where he is on a two-day visit.

Iranian state television said on Friday the country's armed forces successfully test fired a domestically-produced missile which can evade radar, a development analysts said could be worrying for Western forces in the Gulf.

But Israeli missile expert Uzi Rubin said the missiles did not the match the description and sounded like the Russian Iskander-E missile.

"They could be bluffing," Rubin, a former director of Israel's Arrow missile defense program, told Reuters.

The recent decision of the International Atomic Energy Agency (IAEA) to pass Iran's nuclear dossier to the U.N. Security Council has raised fears that the fourth-largest oil exporter might retaliate by cutting off its oil supply.

OIL MARKETS

Oil markets reacted to Mottaki's comments, with the price of U.S. light crude dropping 78 cents to $66.37 per barrel by 1421 GMT, after rallying 4 percent in course of the week.

Iran says it is only interested in peaceful nuclear power and does not want atomic weapons. But it concealed sensitive atomic fuel activities from the IAEA for nearly 20 years.

The EU's three biggest nations -- Germany, France and Britain -- called off 2-1/2 years of talks with Iran after it announced in January that it would resume enrichment work and shortly thereafter began small-scale purification of uranium.

ElBaradei said in a Reuters interview that what was needed was "a diplomatic solution through transparency and cooperation by Iran to build necessary confidence and create conditions for the return to negotiations with the international community."

The so-called EU3 has made a re-suspension of enrichment a condition for the renewal of talks, but Tehran has refused, saying enrichment is a sovereign right it will never abandon.

ElBaradei has been unable to verify that Iran's nuclear program is exclusively peaceful in three years of inspections, though he has found no hard evidence that Iran wants atom bombs.

The Security Council on Wednesday gave Iran 30 days to halt enrichment and asked for a report from the IAEA, the U.N.'s nuclear watchdog in Vienna, on whether Tehran had done so.

But Mottaki said a compromise was still possible. "But if you are referring to the possibility that Iran is going to give up its legal rights (to enrich), that is just not going to happen," he said.

IRAN WILL NOT SUFFER ALONE

Mottaki said Iran was only willing to negotiate regarding industrial scale-enrichment. But the EU3 and United States want Iran to halt all enrichment, including small-scale research.

Mottaki dismissed British suggestions that Iran could face U.N. sanctions if it failed to suspend uranium enrichment, which can produce fuel for nuclear power stations or atomic bombs.

Russia and China, both veto-wielding permanent members of the Security Council, oppose sanctions against Iran. ElBaradei thinks imposing sanctions would be unwise.

"I do hope we can avoid sanctions and escalation," said ElBaradei. "Sanctions will hurt everybody ... Iran will retaliate and I hope very much we can avoid that."

Iran's influential former president, Akbar Hashemi Rafsanjani, said Iran's nuclear dossier should never have been transferred from the IAEA to the Security Council.

"It is not possible to wrongly accuse such a nation (Iran) ... and then send its dossier to the Security Council and drag the region step by step toward a critical situation," Rafsanjani said in a Friday prayers sermon.

"If they (the West) continue the current trend on Iran's nuclear case, everybody will be harmed. Iran is not the only country that will be harmed," he said.

(Additional reporting by Louis Charbonneau in Berlin, Parinoosh Arami in Tehran and Peter Graff in London)

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