Israel On Iran.

Some Israeli officials and commentators during the week hinted the Jewish state could stage a military operation against Iran which, GCC officials warned, could eventually drag the US into a wider confrontation.

At a White House news conference on Dec. 4, President Bush did not rule out the US military option. But he urged the international community against using the Dec. 3 intelligence as an excuse to ease pressure on Iran, saying Tehran was still pursuing a nuclear programme which could be used for military purposes in the future.

Bush added: "The NIE (National Intelligence Estimate) says Iran had a hidden, covert nuclear weapons programme. What's to say they cannot start another covert nuclear weapons programme?" On the US military option, he said: "The best, most effective diplomacy is one in which all options are on the table". But the new NIE makes it far less likely that the US would consider military action against Iran for the time being. Yet the US is still pushing for new UNSC sanctions against Iran, with France and the UK seeking to persuade Germany to join them in a campaign to get China and Russia on board for a new resolution on this.

The NIE finding, which has transformed the debate on Iran, was partly a response to lessons learnt from the intelligence failures over the Iraq war. The US officials responsible for it were on Dec. 6 quoted as saying the new estimates were subjected to extraordinary scrutiny over the previous four to six weeks and did not depend on any single source of information. A senior US intelligence official was quoted as saying: "Based on the 2002 experience, we've really tried to make our process much more robust" - referring to the October 2002 NIE which said Iraq was pursuing nuclear weapons and had advanced with its chemical and biological weapons programmes, conclusions which turned out to be wrong.

The New York Times on Dec. 6 quoted senior US intelligence and Bush officials as saying the 16 agencies reversed their view about the status of Iran's nuclear weapons programme after they obtained notes last summer from the deliberations of Iranian military officials involved in the programme. The notes included conversations and deliberations in which some of the military officials complained bitterly about what they termed a decision by their superiors in late 2003 to end a complex engineering effort to design nuclear weapons, including a warhead which could fit atop Iranian missiles.

The newly obtained notes contradicted public assertions by US intelligence officials that the nuclear weapons design effort was still active. But according to the intelligence and government officials, the notes gave no hint why Iran's leadership decided to halt the covert effort. Ultimately, the notes and deliberations were corroborated by other intelligence, the officials said, including intercepted conversations among Iranian officials collected in recent months. The NYT said: "It is not clear whether those conversations involved the same officers and others whose deliberations were recounted in the notes or whether they included their superiors.

"The US officials who described the highly classified operation, which led to one of the biggest reversals in the history of US nuclear intelligence, declined to describe how the notes were obtained. But they said that the CIA and other agencies had organized a 'red team' to determine whether the new information might have been part of an elaborate disinformation campaign mounted by Iran to derail the effort to impose sanctions against it. Ultimately, US intelligence officials rejected that theory, though they were challenged to defend that conclusion in a meeting two weeks ago in the White House situation room, in which the notes and deliberations were described to the most senior members of President...Bush's national security team, including Vice President Dick Cheney".

The paper quoted "one participant in the conversation" as saying: "It was a pretty vivid exchange". The officials said they were confident the notes confirmed the existence, up to 2003, of a weapons programme about which US officials had first learned from a laptop computer belonging to an Iranian engineer, which had come into the hands of the CIA in 2004.

The paper added: "Ever since the major findings of the new...[NIE]...were made public [Dec. 3], the White House has refused to discuss details of what Bush, in a news conference on Tuesday (Dec. 4), termed a "great discovery" which led to the reversal. Some of Bush's critics questioned why he did not adjust his rhetoric about Iran after the intelligence agencies began to question their earlier findings.

In a statement late on Dec. 5, the White House revised its account of what Bush was told in August and acknowledged that Mike McConnell, the director of national intelligence, had informed him that new information might show that "Iran does in fact have a covert weapons program, but it may be suspended". White House press secretary Dana Perino said McConnell had warned the president that "the new information might cause the intelligence community to change its assessment of Iran's covert nuclear programme, but the intelligence community was not prepared to draw any conclusions at that point in time, and it wouldn't be right to speculate until they had time to examine and analyse the new data".

The NTT quoted "a senior intelligence official and a senior White House official" as saying McConnell had been cautious in his presentation to Bush in an attempt to avoid a mistake made in the months leading to the Iraq war, in which raw intelligence was shared with the White House before it had been tested and analysed. The paper quoted the senior intelligence official as saying: "There was a big lesson learned in 2002. You can make enough mistakes in this business even if you don't rush things".

The paper added: "In fact, some in the intelligence agencies appear not to be fully convinced that the notes of the deliberations indicated that all aspects of the weapons program had been shut down. The crucial judgments made public Monday (Dec. 3) said that while 'we judge with high confidence that the halt lasted at least several years', it also included the warning that 'intelligence gaps discussed elsewhere in this Estimate' led both the Energy Department and the National Intelligence Council 'to assess with only moderate confidence that the halt to those activities represents a halt to Iran's entire nuclear weapons program'.

"The account is the most detailed explanation provided by US officials about how they came to contradict an assertion, spelled out in a 2005 National Intelligence Estimate and repeated by Bush, that Iran had an active weapons program. Several news organizations have reported that the reversal was prompted in part by intercepts of conversations involving Iranian officials".

In an article published on Dec. 5, The Los Angeles Times said another main ingredient in the reversal was what it called a journal from an Iranian source which documented decisions to shut the nuclear programme. The senior intelligence and government officials said a more precise description of that intelligence would be exchanges among members of a large group, one responsible for both designing weapons and integrating them into delivery vehicles. The discovery led officials to revisit intelligence mined in 2004 and 2005 from the laptop obtained from the Iranian engineer.

The documents in that laptop described two programmes, termed L-101 and L-102 by the Iranians, describing designs and computer simulations which appeared to be related to weapons work. Information from the laptop became one of the chief pieces of evidence cited in the 2005 intelligence estimate which concluded: "Iran currently is determined to develop nuclear weapons". The newly obtained notes of the deliberations did not precisely match up with the programmes described in the laptop, according to officials who examined both sets of data, but they said they were closely related.

On Dec. 5 Bush repeated his demand that Iran "come clean" and disclose details of the covert weapons programme which US intelligence agencies said operated from the 1980s until the autumn of 2003. Tehran, Bush said, "has more to explain about its nuclear intentions and past actions, especially the covert nuclear weapons program pursued until the fall of 2003, which the Iranian regime has yet to acknowledge". Bush spoke at Eppley Airfield near Omaha, Nebraska, where a visit intended to showcase health care and to raise money for a Senate race was overshadowed by the furore caused by the NIE and Iran's taunting reaction to it

France & Germany Say Iran Still A Danger: Speaking in a joint news conference at Elysee Palace, French President Nicolas Sarkozy and German Chancellor Angela Merkel on Dec. 6 said Iran remained a "danger" and that the international community needed to keep up the pressure over its nuclear programme despite the NIE. Sarkozy, one of the staunchest defenders of tough new UNSC measures, said: "Notwithstanding the latest elements, everyone is fully conscious of the fact that there is a will among the Iranian leaders to obtain nuclear weapons. I don't see why we should renounce sanctions. What made Iran budge so far has been sanctions and firmness".

Merkel stopped short of explicitly mentioning sanctions, but appeared determined to support current negotiations in the UNSC about new measures, saying: "I think we are in a process and that Iran continues to pose a danger". Both urged to continue with a twin strategy of combining pressure with dialogue. In comments aimed at Russia and China, Sarkozy urged a "coherent" position, a view Merkel said she shared.

US Secretary of State Condoleezza Rice on Dec. 6 began talks in Brussels with EU and Russian officials to urge greater international pressure on Iran to halt uranium enrichment and answer questions about its nuclear programmes. The talks were Rice's first face-to-face sessions with world powers considering new UNSC sanctions. As she flew to Belgium for a conference of NATO foreign ministers and talks between the alliance and former Cold War foe Russia, Rice told reporters: "I don't see that the NIE changes the course that we're on". Rice also saw Israeli Foreign Minister Tzipi Livni on Dec. 7. Israeli officials say their intelligence forces believe Iran is still working aggressively to build nuclear weapons.

Writing in the Financial Times of Dec. 7, British Foreign Secretary David Miliband said Iran should not be afraid of "diplomacy with teeth" as "the alternatives are all worse". He added: "There will remain a lack of trust until Iran resolves issues about past activities and suspends its enrichment programme".

At a press conference in Kabul on Dec. 4, Defence Decretary Robert Gates declined to say whether the US should start holding high-level talks with Tehran in view of NIE's conclusions. He added that the NIE "validates the administration's strategy of bringing economic and diplomatic pressure to bear on Iran".

President Ahmadi-Nejad on Dec. 5 said: "This [NIE] is a declaration of victory for the Iranian nation against the world powers over the nuclear issue... This was a final shot to those who, in the past several years, spread a sense of threat and concern in the world through lies of nuclear weapons".

Israeli PM Ehud Olmert on Dec. 4 was quoted as saying: "We discussed this report with leaders of the [US] administration. It is vital to pursue efforts to prevent Iran from developing a capability like this and we will continue doing so along with our friends, the United States".

Bush later said he spoke by telephone to Putin about Iran. In a lengthy conversation, he said, "I explained to him the content of the NIE, what it meant and how our working together has been effective". He said they also discussed the UN sanctions, though he would not elaborate. But he added: "I think it is very important for the international community to recognise the fact that if Iran were to develop the knowledge that they could transfer to a clandestine programme, it would create a danger for the world". And the fact that Tehran had hidden its past nuclear work, he said, meant it could not be taken at its word.

Bush endorsed Russia's earlier offer to provide Iran with nuclear fuel and then to reclaim used fuel for reprocessing. And if Tehran verifiably suspended uranium enrichment, he said, the US was ready to join its EU partners at the negotiating table with Iran.

US pressure on Beijing to impose financial sanctions on Tehran is showing signs of yielding results, with Iranians who import goods from China complaining about restrictions on trade. The FT on Dec. 6 quoted a Tehran-based businessman as saying banks which had routinely opened letters of credit to underwrite trade with China "now refuse to do so". The Iran-China Chamber of Commerce has sent a delegation to Beijing to discuss the issue. China is Iran's biggest trading partner. The FT quoted another businessman as saying: "Chinese banks... prefer to work with Iranians who import goods to Iran through Dubai to pretend they export goods to UAE rather than Iran". But the US pressure has had no impact on Iran's oil, petrochemicals and minerals exports to China.

The tightening of trade credit came just weeks after the visit to Beijing of Stuart Levey, the US Treasury under-secretary responsible for terrorism and financial intelligence. Levey briefed Chinese officials and state banks in November on successful US efforts to persuade some European institutions to stop doing business with Iran in the hope that Beijing might join in the sanctions. The Chinese were warned that Iranian businesses used a variety of front companies to get around UN sanctions.

US pressure on European companies has led to a decline in their trade with Iran, giving more room to China to increase its exports to the country. It is estimated that the two countries' official trade will reach at least $17 bn in the year to March 20, 2008. The figure excludes billions of dollars of Chinese goods re-exported to Iran through Dubai.