Putin Blinks First, But Keeps Hold of the Fuel Supply

Russia has resumed work on Iran’s nuclear reactor at Bushehr after a two-and-a-half month pause, during which Moscow and Tehran exchanged recriminations over Iran’s default on payment and the quality of Russian work.

According to DEBKA-Net-Weekly‘s Moscow and Tehran sources, notice of this was passed by the Russian firm Atomstroyexport to Iran’s nuclear energy committee.

In other words, president Vladimir Putin blinked first in the argument going back and forth between the two capitals since the winter of 2006.

Our sources report that the main bone of contention is not simply Tehran’s default on payment to Moscow for its services in building the reactor in southern Iran, as widely reported in the West, but rather Tehran’s disappointment in the quality of the technology supplied by the Russian firm

Iran’s nuclear energy experts complain that the Russians are installing at Bushehr substandard, dated equipment and refusing to part with their much more advanced systems. If Moscow thinks it is being underpaid, they say, that is because Tehran is paying exactly what the Russian product is worth, which is admittedly well below the prices cited in their contacts.

When payments from Iran dried up on January 17, Atomstroyexport began pulling its engineers and technicians from Bushehr, first to cut down costs. Putin also informed his aides and the head of the Russian nuclear energy commission Sergei Kiriyenko, that the time had come to put the Iranians in their place; either they paid up in full, or the Bushehr reactor would not be to completed.

In an interesting aside on Moscow’s political scene, five days before Putin changed his mind, Kiriyenko was still protesting that Moscow would not finance the completion of the Bushehr reactor out of its own pocket. He had clearly been left out of the Kremlin loop of negotiations with the Iranians, which culminated in Putin’s surrender.

In the event, Atomstroyexport teams were back on the job Sunday and Monday, March 18 and 19, while the next Iranian installment was deposited in a Moscow bank the next day.

DEBKA-net-Weekly‘s Tehran and Moscow sources comment that the timing of this settlement is suggestive.

The two governments sorted out their dispute the day before the UN Security Council convened Wednesday March 21 to expand its sanctions against Iran over its refusal to discontinue uranium enrichment. Before settling their dispute with Moscow, the Iranians made sure the Russians would not bow to US pressure for harsh penalties.

Putin calculated that drawing the argument out would reflect badly on his prospects of becoming a leader in the global oil and gas markets and show him up as prey to whims in the nuclear fuel trade.

At the same time, our sources stress that the resumption of work at Bushehr ends only one round of the Russian-Iranian dispute; the real crunch comes up at the end of March when Russia is due to provide the reactor with nuclear fuel rods.

On this point, there appears to be an impasse: Moscow will use construction delays as the pretext for postponing the timeline for the Bushehr plant’s commissioning, whereas Tehran is determined to stick to the original deadline and be ready to go by the end of March.

Mohammad Saidi, deputy head of Iran’s atomic energy organization, warned Moscow that the financial and technical woes besetting the Bushehr project would be further aggravated if Russia missed its March deadline for supplying nuclear fuel, whether or not building is completed.

Atomstroyexport insists that fuel delivery will be synchronized with the relevant technical dates – half a year before the reactor is ready for commissioning.

Will Putin surrender again? Or will another row erupt between Moscow and Tehran?