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Iran says it will see atomic watchdog

Iran told Japan yesterday it was ready to start negotiations with the UN's atomic watchdog on snap inspections of its nuclear program, a move that could help clear the way for Tokyo to clinch a deal on a US$2 billion contract to develop a giant oil field.

Resource-poor Japan has been juggling its desire to clinch the contract to develop the Azadegan oil field with pressure from the US -- its main security ally -- to back off because of concerns that Tehran is developing nuclear weapons.

Iran says its program is for peaceful purposes only.

Iranian Foreign Minister Kamal Kharrazi gave Prime Minister Junichiro Koizumi a letter from Iranian President Mohammad Khatami stating that Tehran wanted to broaden cooperation with the UN's International Atomic Energy Agency (IAEA) and would begin talks on signing an Additional Protocol, allowing snap inspections of nuclear sites, a Japanese Foreign Ministry official said.

Iran had said on Tuesday it was ready to sign the IAEA's Additional Protocol but wanted clarification on "the preservation of its sovereignty" under the enhanced inspection program, a reservation analysts said could delay final agreement.

Iran's nuclear programme is in the limelight as the US, the two Koreas, China, Russia and Japan engage in delicate talks in Beijing on North Korea's nuclear ambitions.

Kharrazi said after meeting Japanese Trade Minister Takeo Hiranuma that talks on the deal to develop Azadegan, one of the world's largest untapped oil fields, were "moving in the right direction."

A Japanese-backed consortium missed a June 30 deadline and lost exclusive rights to the deal, but Iran has said it still hoped to conclude the contract with Japan.

After meeting Koizumi, Kharrazi told reporters through an interpreter that it would be in Japan's interest to invest in Iran, since that would help it secure stable energy supplies.

Hiranuma said earlier this week that progress had been made in the talks, but officials have offered no timetable for when a deal might be finalized.

Fears that Tehran wants nuclear weapons were stoked by a new IAEA report that showed Iran had repeatedly failed to inform the UN nuclear watchdog of its atomic activities, Western diplomats in Vienna, where the agency is based, said on Wednesday.

Japan, though, has never been comfortable with Washington's inclusion of Iran -- Tokyo's third largest oil supplier -- as part of an "axis of evil" with Iraq and communist North Korea.

Japanese Foreign Minister Yoriko Kawaguchi reiterated on Wednesday that Tokyo viewed the oil deal and the nuclear concerns as separate matters, and some diplomatic experts said that ultimately Tokyo was likely to finalize the contract.

The timing, however, could well be affected by progress toward Tehran's signing the Additional Protocol.

"There is a public presentation issue with regard to how it chimes with the nuclear problem and that obviously has a bearing on when this [the oil deal] can be done," a Western diplomat said.

"I think Japan will go ahead and take the contract, but the way it will be done is to spread it over a period of time, and fudged in various ways," he said. "It will happen and the Americans will probably accept it, at the end of the day."

The Japanese consortium includes the government-backed Japan Petroleum Exploration Co (JAPEX) and INPEX Corp as well as trading house Tomen Corp.
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