The international community is caught in a welter of coercive and non-coercive options to deal with a defiant Iran, one unwilling to forfeit its Non-Proliferation Treaty (NPT) right to the nuclear fuel cycle. Conspicuously missing from the horizon of Washington policymakers and their European allies is any serious consideration to devise an effective strategy to keep Iran's nuclear potential latent.

The principal reason for this lack of consideration is that the West has set its gaze on the maximalist objective of dispossessing Iran of its nascent nuclear fuel capability. Yet the "zero enrichment" scenario, reflected in White House's opposition to "even one centrifuge rotating," is unlikely to be realized short of a full-scale war with Iran. No amount of coercive sanctions will suffice. Today, within Iran’s Islamist populist milieu, the country’s nuclear capability is considered a source of national pride, enhancing its global status, and has created a “red line” which no politician dares to cross. Many believe in Iran’s right to have its own independent nuclear fuel supply. Thus, there exists the distinct possibility that the intimate interplay between Iranian religious nationalism and the nuclear standoff might offset any tendency to forego the ongoing quest to master the nuclear fuel cycle under international pressure.

Iran's planned installation of 3000 centrifuges by the end of 2006 is a prelude to the ultimate objective of installing 54,000 centrifuges at the facility in Natanz. In addition, Iranian President Mahmoud Ahmadinejad has recently announced that Iran intends to pursue research and development on the more advanced P-2 centrifuges; so far, Iran’s nuclear strategy has relied on the less efficient P-1 centrifuges.

In response, the United States and European Union have escalated the pressure on Iran by calling for tough action by the UN Security Council. The IAEA has already laid demands on Iran, including, above all, a complete suspension of enrichment-related activities, which Iran resumed in January 2006 after a "voluntary and non-legally binding" suspension in November 2004.

Recently, Iran has pursued differentiated responses to the IAEA and the UN Security Council requests, instead of an outright defiance, thereby complicating the Council’s next moves. It is continuing its previous cooperation with the IAEA's inspection regime while displaying a greater nuclear transparency than before. By following the prescriptions of a differentiated response, Iran’s insistence that its mastery of the fuel cycle is a fait accompli goes hand in hand with the legality of Iran's action within the framework of Article IV of the NPT, which permits Iran's quest for an independent nuclear fuel cycle. In a letter to the IAEA, dated April 27, 2006, Iran pledged to resolve all the remaining "outstanding questions" within a three-week timetable.

Iran's quest must be understood within the historical context of foreign contractors and other governments who repeatedly reneged on their promised delivery of nuclear technology, fuel, and expertise. For example, after the Islamic Revolution of 1979, the US government reneged on its contractual obligation to provide nuclear fuel for a small research reactor in Tehran. Furthermore, Iran sued Siemens, a German company, for refusing to finish the Bushehr power plant begun before the revolution. In 1995, Russia took over the project, planned for completion in 1999. At present, seven years after the deadline, the 1000 mega-watt light-water reactor remains non-operational amid Iranian complaints of overcharging and lagging by Russia. The lack of reliability of foreign supply, aside from the question of global prestige and national pride, is Iran's primary reason for seeking an independent fuel cycle. There is nothing irrational about this, despite US assertions to the contrary. Top US officials criticized the Iranian president's announcement of the technological breakthrough in uranium-enrichment at low-grade for purely peaceful purposes. The United States needs to seriously contemplate President Ahmadinejad’s related proposal for an international and/or regional consortium for nuclear fuel production inside Iran. This proposal, first aired at the UN General Assembly in September 2005, has its antecedent in the experience of the Dutch-led company, Urenko, which has similar, “black box” technological operations in Europe and the United States.

The United States must rethink its nuclear approach toward Iran. Instead of pressuring Iran to give up its nuclear fuel technology, set up through exorbitant costs, and to become completely dependent on nuclear fuel imports, the United States and its European allies must reorient their Iran policy and actively explore the option of "objective guarantees" that Iran's nuclear activities are not diverted to illicit military purposes. The issue of "objective guarantee" was stipulated in Iran's Paris Agreement with the EU-3 (Germany, France, and England) in November 2004. The agreement called for Europe's "firm commitment" of economic and nuclear cooperation as well as "cooperation against terrorism" in exchange for Iran's verifiable peaceful nuclear program. Unfortunately, shortly thereafter, under intense US pressure due to the United States faulting the Paris Agreement for its acknowledgement of Iran's nuclear rights "without discrimination," the European Union shifted course and insisted, as it has until now, on the permanent suspension of Iran's enrichment-related nuclear activities.

To continue the present pattern of policies toward Iran—seeking UN sanctions in the absence of any so-called "smoking gun" confirming the suspicions of a nuclear weapons program and the IAEA's robust inspection of Iran's civil and military facilities since 2003—is self-defeating. For one thing, these policies ignore a delicate yet important fact about the dual purpose of nuclear technology (that is, the permanent possibility of "reverse engineering" whereby the nuclear know-how itself would induce Uranium-enrichment related activities) and clandestine enrichment by Iran unwilling to shelf its nuclear know-how. With the aim of completely divesting Iran of its nuclear (weapon) potential all but impossible, a prudent Western approach is not to begin pondering the "nightmare scenario" of "living with a nuclear Iran," to echo a recent opinion column by Massachusetts Institute of Technology professor Barry Posen; rather, the question should be how to persuade Iran not to cross the threshold of using its latent potential for nuclear buildup.

A solution for this is a multi-layered package of economic, security, technological, and even nuclear incentives, simultaneously putting to rest Iran's post-9/11 security anxieties as well as its worries about the reliability of secured fuel supply. Concerning the latter, the Russian proposal for a joint venture with Iran to produce nuclear fuel for Iran on its territory is a viable option that, in light of Iran's scarcity of natural uranium that is hardly sufficient for six years of Bushehr's operations, would further guarantee that Iran's program remains civil. After all, irrespective of its oil and gas deposits, as a growing economy, Iran has tremendous energy needs and its pursuit of alternative, renewable sources of energy makes perfect economic sense.