Iran brandishes oil weapon in nuclear row

TEHRAN (AFP) - Iran has again brandished oil as a weapon in a dispute over its nuclear programme, as it continued to resist international demands to freeze sensitive uranium enrichment work.

The threat came amid mounting pressure on Tehran to accept a proposal that it halt enrichment -- at the centre of fears it could acquire nuclear weapons -- in exchange for multilateral talks and a package of incentives.

"If the country's interests are attacked, we will use all our capabilities, and oil is one of them," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by state television.

"The world needs energy and understands the effect on the market of oil sanctions against Iran, and no one will make such an unreasonable decision," the minister said, predicting sanctions against Iran could push crude up to 100 dollars a barrel.

The West suspects Iran, which is the OPEC oil cartel's number two exporter, is secretly trying to build nuclear weapons. Iran denies this and insists its atomic programme is purely for electricity generation.

Tehran has been asked to reply to the proposal -- drawn up by Britain, China, France, Germany, Russia and the United States -- by the end of the month, although President Mahmoud Ahmadinejad said it would take until August 22 to give a formal answer.

But Iran appears to still reject the key condition in the package -- a full and verified suspension of uranium enrichment -- and continues to call for negotiations devoid of any "preconditions".

"The suspension of enrichment is one step backward. We think Europe should negotiate without preconditions... which only cloud the negotiating atmosphere," foreign ministry spokesman Hamid Reza Asefi told reporters.

"Instead of setting preconditions that are both unreasonable and baseless, we should negotiate," he added.

Last week, US President George W. Bush warned Iran faced "progressively stronger political and economic sanctions" if it refused the offer.

And diplomats in Vienna told AFP that the United States remains convinced Iran should not be allowed to do any uranium enrichment work, after asking the UN nuclear agency for a technical assessment.

The one-and-half page unofficial text supplied by International Atomic Energy Agency chief Mohamed ElBaradei gives the watchdog's assessment that even reduced enrichment work would help Iran move towards "successful long-term sustained centrifuge operation" needed to make enriched uranium that can be nuclear power reactor fuel or atom bomb material.

But one diplomat close to the Vienna-based watchdog said it makes no sense to torpedo talks due to small-scale enrichment work Iran is already doing and which is not yet a proliferation risk.

"The United States will push very hard until the last minute in the hope of getting the Iranians to give in but at the end of the day they will accept some form of enrichment activity" in order to get talks started, said the diplomat, who asked not to be named due to the sensitivity of the issue.

Turkish Foreign Minister Abdullah Gul also arrived in Tehran on Saturday evening, carrying a message from Prime Minister Recep Tayyip Erdogan.

"As a neighbouring country, we are trying to find a peaceful solution, since it is in the interest of the two countries, the region and the world," Gul told reporters.

"We believe that with composure we can get results, and we know that Iran is studying the proposal with composure," he added. "We hope that this issue will be solved diplomatically and peacefully, since it is in the interest of all parties."

Top nuclear negotiator Ali Larijani told the official IRNA news agency that Iran was "seriously" looking at the offer and that it would "soon give the results of this study".

Larijani is expected to meet EU foreign policy chief Javier Solana in the coming days, although he said the timing and venue had yet to be fixed.