IRAN - Nov 2 - Iran Fires Missiles In War Games.

Iran was reported on Wednesday to be accelerating its uranium enrichment process even as Europe took the first steps at the UN Security Council towards obtaining a resolution that would impose sanctions on Iran for refusing to suspend its nuclear fuel programme. Iran's semi-official student news agency, ISNA, quoted an unnamed Iranian official who said a second network, or cascade, of centrifuges used to produce enriched uranium was installed last week, and that injection of the gas feed would take place this week. "The product of the second cascade will be achieved soon after gas injection", the official said. Iran began running one cascade of 164 centrifuges at its Natanz facility under UN inspection in January. It denies it has a weapons programme and says the uranium will only be enriched to the low level needed to fuel a civilian nuclear reactor. Experts in Tehran believe Iran's installation of the second cascade is intended to signal its defiance of sanctions that have been threatened following the Islamic republic's refusal to heed a UN security council demand to suspend the programme that set an August 31 deadline. "It's a significant part of Iran's policy... to show 'stick policy' will lead only to escalation of [the] crisis and won't hurt Iran's irreversible path", commented Aftab website which is close to Hassan Rowhani, the former nuclear negotiator. Regime insiders say Iran's top leadership is not particularly worried about nuclear-related sanctions. On Wednesday France, Germany and the UK - the so-called EU3 that had been negotiating with Iran - presented a draft sanctions resolution to the US, Russia and China for discussion. Diplomats said one issue at dispute between the EU3 and the US was the future of the Bushehr reactor under construction by Russia in southern Iran. The draft says the "construction" of Bushehr is exempt from the sanctions, but the US has sought to block Russia's planned supply of nuclear fuel next year. Nicholas Burns, US under secretary of state, said he did not think the Bushehr issue would be a major stumbling block. The European proposal would seek to prohibit nuclear and ballistic missile cooperation with Iran - unless exempted - by taking "necessary measures" to prevent the supply, sale or transfer of materials and technology. It would also halt related financial transactions, block international travel for Iranians connected to those activities and freeze their overseas assets. A list is to be drawn up of individuals subject to the travel ban and asset freeze. It is not clear how far up the political hierarchy such a list might go. Discussions among the five permanent members of the Security Souncil and Germany are to start on Thursday. Tony Blair, the UK PM, told parliament that the UK was working closely with other veto-wielding Security Council members to get a "proper, binding resolution". The US and Europe say the proposed resolution is intended as a first step, and would be followed by steadily escalating measures if Iran did not comply. At the same time, diplomats are worried that the process could end up replicating the crisis with North Korea whereby Iran would respond to threats by expelling UN inspectors and quitting the nuclear Non Proliferation Treaty. For this reason Europe - including the Russians who have a $1bn contract - are insisting that the Bushehr project should be allowed to continue. European officials hope negotiations will resume with Iran but on the precondition that it first suspend

its enrichment programme. President George W. Bush reiterated yesterday that the US would be ready to join Europe in negotiations following verifiable suspension. "We've got a lot of issues with Iran", Bush told a news conference. "The first is whether or not they will help this young democracy succeed", he said, referring to Iraq. He said the "second issue" was whether Iran would help the Lebanese government, and that the "big issue" was "whether or not Iran will end up with a nuclear weapon".