What is behind Russia’s delay of Iran’s nuclear reactor?

The Russian announcement came just two days before a UN Security Council deadline for Iran to shut down its uranium enrichment facilities. Tehran, which insists that all its nuclear programs are for peaceful purposes, has refused to comply. The Bushehr reactor, which is being completed by Russian firms, is designed to produce electricity and is not included in the UN resolution.

According to Sergei Novikov, spokesman for Russia’s nuclear agency Rosatom, Iran is behind in its financial commitments. “In February no payments were made. In January we received just $5.1 million of the $25 million due,” he said. Underfinancing, Novikov explained, would influence the agreed timetable, including the delivery of nuclear fuel and the launch of the reactor.

After repeated delays, Russia and Iran agreed last year to a timetable for the reactor’s completion: the delivery of nuclear fuel was due by March 2007 and the launch of the facility in September, with electricity generation to start in November. Now the supply of nuclear fuel will be delayed. According to Andrei Cherkasendko, an official with the Russian state nuclear power company Atompromresursy, operations will probably not commence until mid-2008.

The announcement provoked an angry Iranian response. Muhammad Saeedi, deputy director of the Atomic Energy Organisation of Iran, denied the country had been late in making payments. He insisted that the financial problems lay with the Russian contractor, not on the Iranian side. On Wednesday, Gholam-Ali Haddad-Adel, the speaker of the Iranian parliament, urged Russia to complete the reactor on time and warned that a delay “will have adverse affects on the minds of the Iranian people”.

It is evident that “non-payment” is simply an excuse for the delay. Iran wants to make payments in euros, rather than US dollars, as part of its stated policy of holding reserves and settling accounts in currencies other than the dollar. As part of its campaign against Tehran, the Bush administration has been pressuring European and Asian banks to freeze Iran’s dollar-denominated accounts. Rather absurdly, Rosatom has refused Iranian payment in euros, with a renegotiation of the original contract accordingly.

Several commentators have noted the $1.3 billion contract signed in 1995 is no longer as profitable for the Russian contractors involved. Any renegotiation of the contract could be used to squeeze some more money from Iran. The high-profile project is, however, an important aspect of Iranian-Russian relations. A petty dispute over the nearly completed Bushehr reactor could compromise Moscow’s hopes for further nuclear construction contracts that have been mooted to follow.

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