NEWS,18. AND 19.05.2013

UK’s Labour moots new company tax plan

Britain's opposition Labour party, tapping into widening public anger over corporate tax avoidance, wants the government to push for new international rules to force companies to report profit and tax payments country-by-country.
Campaigners say the move, which is receiving increased support internationally despite strong opposition from business, will deter companies from shifting profit into tax havens where they have no staff or sales.
Prime Minister David Cameron has said corporate tax avoidance would be discussed at the annual summit of the Group of Eight leading industrial economies, which Britain is hosting in Northern Ireland next month.
He has urged companies to be more transparent but has only proposed voluntary measures.
Companies say country-by-country reporting will impose unreasonable administrative burdens.
But campaigners say firms fear being embarrassed by highlighting how they frequently pay low or no taxes in countries where they have big sales and how they report big profits in tax havens.
The standard could also lead to companies revealing that they earned no money in countries where they told investors they operated profitably.
Tax reform
Coffee chain Starbucks received broad political, media and public criticism in Britain last year after an investigation showed it assured investors the United Kingdom was a profitable market after telling tax authorities its operations lost money.
The European Union agreed earlier this year to force European banks to report profit on a country-by-country basis as part of measures to ensure they hold enough capital.
The US and EU have also agreed measures to force companies in the extractive industries to publish tax and other payments to resource-rich nations, to reduce corruption.
Labour on Sunday issued a new policy document on corporate tax reform which backed forcing companies to publish figures on revenues, profit and taxes in each country that they operate.
Ernst & Young, one of the 'big four' accounting firms which audit most of the big multinational companies, has warned clients that country-by-country reporting may become a global standard unless they come up with an alternative.
Britain's CBI business lobby group has urged businesses to publish "narrative" reports explaining their tax affairs to the public.
A committee of UK lawmakers has accused Google of "unethical behaviour" for avoiding tax by shifting profit from UK sales to an untaxed unit in Bermuda.
Google says it complies with tax rules in every country where it operates.

Cyber experts fear escalation of attacks

Cyber security professionals know a myriad of ways hackers can try to wreak havoc on critical infrastructure or infiltrate corporations to steal or spy, but it is the fear of the unknown that some say keeps them up at night.
US security officials and private sector experts wonder what kinds of time-bombs can be - or have been - embedded by malware into computer networks, just waiting to explode.
Cyber espionage is already "the greatest transfer of wealth in history", National Security Agency Director Keith Alexander, the top US general in charge of cybersecurity, told the Reuters Cybersecurity Summit in Washington this week.
"Disruptive and destructive attacks on our country will get worse," he said. "Mark my words, it will get worse."
Stealing software or money like the $45m lifted from two Middle Eastern banks in a daring global plot revealed this month might pale next to an attack that could, for example, switch off the lights in a major US city.
That was the fear in New Orleans in February when a power outage struck the Super Bowl, the National Football League's championship game, witnessed by tens of millions of viewers. The outage was blamed on an electrical relay device and not a cyber attack.
"The known unknown is what I worry about," US Secretary of Homeland Security Janet Napolitano told the Summit.
"For example, we don't have the identity of all the adversaries who are trying to either commit crimes or acts over the cyber networks. The things we know about, we can deal with. It's the known unknown," she added.
The military is a big target, something that Rear Admiral William Leigher, who is in charge of "information dominance" with the US Navy, takes on board.
"Our networks see thousands of intrusion attempts every day...staying up with the threat, making sure that our defensive systems are up to par is probably one of the things that gets most of my attention," Leigher said.
To be sure, the United States has not suffered the kind of destructive cyber attack that damaged some 30 000 computers at Saudi Arabia's oil company, Saudi Aramco, last year. But experts said they were worried about the increasingly sophisticated cyber capabilities of countries such as China, Russia and Iran.
"This new growing trend of nation states engaged in cyber attacks that are designed to be destructive to parts of the US economy is very, very concerning," said Mike Rogers, chairperson of the US House Intelligence Committee.
"The ferociousness of these attacks is increasing and it's something that we better get a handle on," Rogers added.
Dmitri Alperovitch, co-founder of Crowdstrike, a security technology specialist firm that works with governments and private companies, said he is most concerned about Iran, particularly if there is a spike in tensions in the Middle East.
He is watching the attacks that have taken down the websites of more than a dozen US banks in the past nine months. There are no signs that hackers have managed to destroy or modify crucial financial data, but that is the fear.
"Attacks that focus on modifying data in the stealth way, sabotage, integrity attacks - those are the ones that are most insidious and those are the ones we really should worry about," Alperovitch said.
The migration of ever more elements of the economy to the digital world opens the door to malfeasance.
"We keep hooking more and more stuff up to the internet, so the attack surface keeps growing," said Michael Daniel, cyber security policy coordinator at the White House.
"Pretty soon your coffee maker and your refrigerator is going to be an attack vector because it's going to be hooked up to the internet."

More Than 1,000 Unaccompanied Diplomats Face Threats, PTSD As Obama Calls For Increased Embassy Security

When the Yemen-based branch of al Qaeda placed a bounty on her husband's head, Mary Feierstein learned of it from a friend who called and said, "You must be a mess!"

U.S. Ambassador Gerald Feierstein was thousands of miles (km) away at the U.S. Embassy in Sanaa, without his wife and family on what is called an "unaccompanied" posting.

He is one of more than a thousand U.S. diplomats on such tours of duty in danger spots around the world, part of a trend that is changing the definition of being a diplomat.

Over time, his wife has learned to stay calm when the phone rings unexpectedly at her home outside Washington. For nearly five years, she has not lived in the same country as her husband, a career diplomat who specializes in the Middle East and South Asia.

After militants stormed the U.S. Embassy in Yemen last September, breaking through to the inner building and ripping plaques and lettering from the walls, Feierstein called his wife to tell her he was OK.

He had also called her a few years earlier when he was based in Islamabad, Pakistan, and a bomb went off near his residence. He was unhurt in that attack.

But when Al Qaeda in the Arabian Peninsula considered by U.S. officials to be al Qaeda's most dangerous affiliate offered 3 kg of gold last December for the killing of Feierstein, it was Mary's turn to call her husband. He played down the danger.

"He said it was old news. They are constantly under threat, you know," Mary Feierstein said in her first media interview since the threat.

After a police officer came to her home to give her his card and tell her to call him if she needed any help, "that's when I got scared," Feierstein said.

The new perils for foreign service officers were spotlighted last Sept. 11, when militants overran the temporary U.S. mission in Benghazi, Libya, killing four Americans, including Ambassador to Libya Chris Stevens. Two other U.S. diplomats were killed in Afghanistan in the past year.

President Barack Obama, still grappling with controversy over the Benghazi attack, called on Congress on Friday to fully fund his $4 billion embassy security budget request.

In a memorial ceremony earlier this month at the State Department, Vice President Joe Biden said that diplomats "take risks that sometimes exceed those of the women and men in uniform."

Honored along with Stevens were Sean Patrick Smith, Tyrone Woods and Glen Doherty, who died in Benghazi; and foreign service officers Anne Smedinghoff and Ragaei Said Abdelfattah, killed in Afghanistan in 2013 and 2012.


FIVE-FOLD INCREASE IN UNACCOMPANIED DIPLOMATS

The State Department says there are about 1,100 U.S. foreign service officers now at posts abroad where they are unaccompanied or there are limits on who can accompany them - usually meaning no children.

That is a five-fold increase in unaccompanied American diplomats over the past decade, and represents about 14 percent of U.S. foreign service officers serving overseas.

The change began with "civilian surges" into the war zones of Iraq and Afghanistan to help with stabilization and reconstruction. Over 400 unaccompanied diplomats are in those countries.

Then, the Arab Spring uprisings starting in 2011 added many unstable countries to the list where the State Department did not want to send families.

The fluctuating list now includes Afghanistan, Iraq, Pakistan, Yemen, Libya and Tunisia, as well as the new African state of South Sudan, the State Department said.

The U.S. embassies in Algeria, Sudan and Lebanon are in the "limited accompanied" category as is the U.S. Consulate in Mexico's third-largest city, Monterrey, a focal point for drug-related violence.

The risks to diplomats are not all external. A 2007 State Department survey said 17 percent of employees who had served in dangerous posts indicated some symptoms similar to those of post-traumatic stress disorder. The department, following the military's lead, has set up a program to help diagnose and treat PTSD in its employees.

Mary Feierstein realized she was one of an expanding group of left-behind relatives when she started attending the year-end holiday parties the State Department throws for them, and noticed the crowd getting bigger every year.

She also noticed a lot of small children at those parties, and admitted to thinking, "At least my kids are grown." Her children, two daughters and a son, are all in their 20s. Her son has served two tours of duty with the Marines in Iraq.

Then-Secretary of State Hillary Clinton attended the holiday parties, at which some of the unaccompanied diplomats were Skyped in from abroad. Feierstein said she thought Obama should attend too.

The president did call Gerald Feierstein to thank him for his service after the Yemen embassy was attacked last Sept. 13, two days after the Benghazi assaults.


'NEW NORM'

The United States used to be quicker to evacuate its embassies and consulates when dangers arose, said Susan Johnson, president of the American Foreign Service Association, the official union representing the Foreign Service.

These days, Washington tries to manage risks by building up the physical security of posts and increasing diplomatic security personnel, she said.

"In the process, we seem to have built a new level of tolerance for the amount of risk our diplomats face," Johnson said, adding that unaccompanied tours were increasingly becoming "a new norm."

There is pressure on diplomats to do the dangerous tours in order to advance. It is perceived to be "almost mandatory" to serve at an unaccompanied post and "punch that ticket" during a Foreign Service career, she said.

The State Department said 20 percent of its current employees had served in Iraq, Afghanistan or Pakistan.

The department offers incentives such as danger pay and shorter tours. Unaccompanied posts can be just 12 months, with several breaks, and families can often be left behind at a previous post to minimize disruption.

The State Department has made considerable progress in supporting employees in unaccompanied posts, its inspector general said in a 2010 report. Still, it said, "many returnees experience problems adjusting to their follow-on assignments," and more counseling services may be needed.

Mary Feierstein was born in Pakistan and met her husband on his first tour there in the 1970s. She said he was one of some "really tough people" that the State Department keeps cycling through stressful, dangerous posts.

Gerald Feierstein served in Lebanon unaccompanied in 2003 and 2004, then returned to Washington for a few years and was a senior official in the State Department's counterterrorism office.

He was sent to Pakistan for the third time in his career in 2008, as deputy chief of mission in Islamabad. His family stayed in the United States. In September 2010, Feierstein went to Yemen, again without his family.

"We were planning to go later. ... After the Arab Spring, we haven't been able to go there at all," Mary Feierstein said.

At home, she volunteers for the local Democratic Party and supports causes like gun control. She last saw her husband in March.

While tired of the separation, she said she felt sorrier for her children, even though they are grown. "They miss him so much. They are so happy when he comes home."

New Energy Policies in the Middle East Must Go Hand in Hand With Subsidy Reform

The Middle East has amongst the highest average per capita energy consumption of any region in the world, at twice the global average. Consequently, it also has amongst the highest per capita carbon emissions as well. Furthermore, not only is overall energy use high but the energy mix itself is unusually weighted towards oil compared as compared with other regions, with oil accounting for 50 percent of primary energy demand compared with a global average of 33 percent and an OECD average of 38 percent.
There are three major consequences of the Middle East's high energy intensity and reliance on oil: first, it carries a large implicit economic cost as a result of the value of oil and gas exports foregone and additional gas imports required in some cases; second, such a high degree of energy dependence increases the economy's volatility through its greater exposure to energy supply disruptions or price shifts; and third, it has increased the region's greenhouse gas emissions.
Given the intentions of the region to boost economic growth, reduce economic dependence on volatile energy markets and curtail greenhouse gas emissions growth, the region's high energy intensity is a natural target for reform.
Fortunately, the very fact that the region's energy use is anomalously high and possibly inefficient is a sign that relatively easy gains are possible to bring it under control. There are clear signs that there is significant scope for efficiency improvements. Energy use per unit of GDP is even more dramatically out of step with other regions than per capita statistics, with energy use per unit GDP double the G7 average for example, suggesting that with the right reforms energy demand growth can be slowed or even cut without harming economic growth. Indeed cutting energy demand by increasing energy efficiency would actually boost economic output as for the region's oil producers more crude would be available for export, while for the region's net gas consumers less gas would be need to be imported, improving the balance of trade in both cases.
So the theoretical potential for improvements is clear, but what are the practical steps to achieve it? Governments are currently focused on developing alternative energy options as their primary solution, nuclear and solar power especially. These energy sources will deliver two of the key energy policy aims of the regions' authorities: reducing their economic dependence on oil and cutting greenhouse gas emissions growth. However, to focus solely on these fuels would not fix the Middle East's energy problems.
First of all, the high cost and slow delivery of these new energy sources mean that they cannot deliver all of the energy supply changes needed in a timely manner. That is why policymakers must also put the promotion of natural gas front and center alongside nuclear and solar. Natural gas is the clear choice to complement these alternative energy supplies because the region has reserves in abundance which can be developed quickly, while gas-fired power plants are fast to build, reliable, responsive to demand and emit the least greenhouse gases of any hydrocarbon, at least 50 percent less than coal and 30 percent less than oil in power generation.
Second, and more fundamentally, promoting nuclear and solar, or even natural gas, do not address the problem of energy consumption as previously mentioned. Without addressing this, economic growth will still be affected by demand constantly surpassing supply.
The underlying source of the region's high energy intensity must be addressed and reformed if the region is to deliver a sustainable energy policy with maximum economic benefits: subsidies. Subsidies to oil, gas, water, electricity mean that consumers pay far less than the market rate for these products while producers cannot achieve full value for their output. The United Arab Emirates, for example, has amongst the highest subsidy rates per person in the world, with energy subsidies worth nearly $4,200 per capita per annum in 2011 according to the IEA. While such costs may be internalized by the state and judged to provide worthwhile social benefits, subsidies also always distort market incentives and result in a less efficient energy and economic outcome in the long-term.
Middle East energy use is so high because consumers have little incentive to reduce their energy consumption or make their energy use more efficient since the financial savings from doing so are negligible. Conversely, producers have less incentive to develop new supplies if they cannot sell for above the cost of production. Moreover, as the economy and energy market fundamentals shift, the lack of any market-based price signals means that supply and demand does not respond quickly enough to changing circumstance, slowing the economy down further.
A classic example of the effects of subsidies to constrain the region's economic potential is the role of oil in Saudi Arabia's power sector. In the summer months over a million barrels per day of oil is burnt in power plants to meet peak power demand because there is insufficient non-associated gas production to meet demand. Subsidies exacerbate the problem at every turn: subsidized power prices boost demand; subsidized oil prices make it feasible to burn for power even though it comes at a huge opportunity cost compared to the revenues it would have achieved if exported; at current prices Saudi Arabia there is an opportunity cost of USD 85-95 on every barrel burnt in its power generation sector, and so with oil demand in the power sector in excess of 230 million barrels a year that is $20 billion of lost export revenues. Finally subsidized gas prices create the supply shortfall in the first place because they make it uneconomic to explore for and develop the non-associated gas resources that Saudi Arabia is believed to have in abundance in recent years LUKoil, Eni, Repsol, Shell and Sinopec have all committed to look for natural gas in the country and subsequently exited without success while leading to unconstrained industry demand growth. Moving towards a market based system would address all of these imbalances and make the Saudi or any other Middle East economy healthier and more robust.
The eventual removal of subsidies will create both winners and losers, so a transfer from the current system to a new one must be carefully designed to smooth any disruption and compensate the vulnerable but if a plan is prepared and carried out over a number of years this should not be an insurmountable problem. Ultimately, supply side reforms, to boost alternative energy sources can only ever be half a solution. Demand side reform, via a path to ending energy subsidies in the region, is equally essential to deliver the best economic future for the Middle East and its wider effect on the global economy.

NEWS,22.11.2012

Summit fatigue leads to bad decisions

The European Union may have won the Nobel Peace Prize this year, but to many EU leaders, officials, diplomats and even journalists, it can feel more like a torture chamber.Increasingly, Europe is governed at night by leaders in an advanced state of exhaustion, disregarding scientific evidence that this can lead to bad decisions, or non-decisions.Over the past three years, the EU has held 25 summits to try to tackle its debt crisis and related economic turmoil, with few of those meetings ending before 3 or 4 am, usually after 12 hours or more of near-fruitless negotiation. Add to that more than 40 finance ministers' meetings, the most recent of which ended at 5 am on Wednesday, again without agreement, and it is easy to see how a set of institutions designed to foster peace and stability in Europe can end up delivering frustration, angst and head-numbing pain."I'll put it this way: I woke up at 5 am or 5:30 am yesterday and we ended in the morning around 4 am," Slovak Prime Minister Robert Fico complained after the last, largely unsuccessful summit in October. "This is how all of us operate, we adopt very serious decisions under pressure," he said, referring to the EU's increasingly weary heads of state and government. The EU's 27 leaders gathered for another summit on Thursday and Friday, this time to try to hammer out an agreement on around €1 trillion ($1.3 trillion) of spending over the next seven years. It promises to be a bruising clash of national interests rather than the model of reconciliation and harmony commended by the Nobel committee, although it will still be "jaw, jaw" rather than "war, war". Gatherings to negotiate the long-term budget only happen every 6 or 7 years and are notorious for running over deadline and for being extremely hard-nosed and ill-tempered affairs. Former British Prime Minister Tony Blair described his experience of it in 2005 as the most difficult negotiation he handled while in office, tougher even than the 1998 Northern Ireland peace talks that led to the Good Friday agreement. Already EU officials are warning that these budget talks could run into Saturday and Sunday, making it what is known in diplomatic circles as a "four-shirt" summit.Staff at the European Council in Brussels, where EU leaders meet, have been told to be ready to work into Saturday at least. British Prime Minister David Cameron has cleared his schedule for the entire weekend, a spokesperson said. French President Francois Hollande has done the same. Journalists, around 1 500 of whom are accredited to cover the meeting, took up residence in the vast glass and steel entrance hall on Thursday morning and will stay encamped there until a deal is done, or negotiations break down. The effect on the EU's public image among its 500 million citizens is unedifying."It's not exactly glamorous and some would say it's downright torture," said one EU diplomat, a veteran of at least 30 EU summits. "Everyone gets extremely fed up."Sweden has organised extra bedding for its diplomats to take a rest in their delegation room if necessary.Bad decision making? The larger issue, though, is whether the pressure-cooker atmosphere and endlessly drawn-out negotiating schedule is conducive to good decision-making.Everyone knows that drivers should take a rest after four or five hours at the wheel to avoid accidents. Shouldn't the leaders of nation states take the same precaution lest they take a bad decision that might run their country off the road?A study published by three academics in the Proceedings of the National Academy of Sciences in the United States last year showed that a judge's willingness to grant parole can depend to a large extent on how tired he or she is and when they last ate.The study examined more than 1 000 parole decisions made by experienced judges over a 10-month period. It found that the more decisions judges have to make, the more difficult it becomes to stay consistent, they get decision fatigue."The theory determines that decision-making capacity is a limited resource, and when many decisions are made in sequence, the mental capacity diminishes," Professor Shai Danziger of Ben-Gurion University, one of the authors, said at the time.That could be a lesson for EU leaders and the political advisers, diplomats and hangers-on who have to help them make the right decisions time and again for days in a row.One experienced EU ambassador, a veteran of multiple foreign postings in high-pressure places, said a lesson could be drawn from how Israel handles Middle East talks.When the Oslo peace accords were being negotiated with the Palestinians in the mid-1990s, Israel would change its negotiating team every six hours or so to avoid fatigue and the risk of mistakes."No one can negotiate at full capacity for more than six hours at a time, you just can't concentrate that long," the ambassador said. "They wanted to make sure they had a fresh team that was at its sharpest."China has employed similar tactics in business and trade negotiations, officials say.By contrast, EU leaders will have at least 12 straight hours of negotiation on each of the next two days and more if the meeting drags on into the weekend.And if that isn't enough, there's another meeting of finance ministers starting on Monday evening.

Lessons of the Gaza War

Now that the cease-fire between Israel and Hamas has begun to take effect (at least for now), it's time to begin to assess the outcome of the war, and where we go from here.

1. The big star and game changer is the Iron Dome anti-missile defense system. Without it, there would have been many more Israeli casualties, and the Netanyahu government would undoubtedly have sent ground troops into Gaza. Look for the immediate hot topic in security circles to be anti-missile defense systems, and look for American aid to Israel to increase on this front. President Obama has already indicated his support.
2. Israel often has a hawkish reputation, but it is amazing that it has watched as Hamas and Hezbollah on its southern and northern borders gradually escalated missile capabilities. We Americans wouldn't have done that if some group developed much less of a capability on our Canadian or Mexican borders, let alone both. Look for Israeli hawks and doves to both argue that their analysis was correct, and recommend policies accordingly.
3. Hamas is a big winner. Even in the last hours of the conflict, it was still capable of attacking Israel. Look for an enhanced Hamas prestige among Palestinians and in the Arab world. More troubles for the U.S., Israel, and the Palestinian Authority.
4. But, at least in the short term, look for a longer term truce and the dramatic reduction of missiles from Gaza raining on Israel, and therefore a limit on Israeli retaliations. Look for both sides to declare victories; greater standing for Hamas, and enhanced deterrence for the Israelis.
5. The new Islamist Egyptian government performed well in becoming the main sponsor of the cease-fire agreement, but the Sinai -- the conduit for arms to Gaza -- has become more lethal than ever. Look for pressure to increase on Egypt to do something about Sinai, and for quiet discussions calling for the addition of western advisers to help to regain Cairo's control. Egypt's role in the cease-fire and its weakness in Sinai could and should actually enhance the Israeli-Egyptian peace treaty if it is handled properly.
6. Iran is a big winner. It managed to provide the missiles to Hamas via Sudan and through the Sinai that had the greatest psychological impact on both Israelis and Arabs alike by seeming to threaten Tel Aviv and even Jerusalem.
7. At the same time, the confrontation with Iran becomes more complex, as there will be mixed interpretations of the meaning of the Gaza War. On the one hand, there will be less enthusiasm for an attack on its developing nuclear weapons program among the already wary Israeli public and a significant number of security specialists, reinforced by American and European caution. On the other hand, others will argue that the Hamas arsenal suggests that a nuclear Iran would be even more dangerous. Look for intensified disputes in the months to come about a possible attack on Iran, even tougher sanctions, and more pressure on President Obama to both try to reach a negotiated settlement on that front and to consider American action.
8. Similarly, as suggested in the cease-fire agreement, there will be alleviation of the already-diminished Israeli blockade of Gaza. Look for much greater flexibility on civilian goods entering Gaza and much more attention to the passage of Libyan and Iranian arms (through Sudan to Egypt) to Hamas.
9. The Palestinian Authority under Mahmoud Abbas is a big loser. It will be more difficult than ever to bolster the Fatah leadership on the West Bank as Hamas grows in stature. The United States will be challenged to provide more economic aid and more diplomatic activity on the peace process. Look for much more attention to the Israeli-Palestinian peace process than at any time since mid-2011, when President Obama's initiative at the time quickly fizzled.
10. American efforts will be more complicated than ever because of the imminent Palestinian bid to become a non-member observer state at the UN. At least in the short term, membership will strengthen Abbas, but the missile war with Israel strengthens the possibility of Hamas leadership. The U.S. cannot afford Hamas, an ally of Iran, potentially representing Palestine at the UN, should Abbas weaken further. Look for the U.S. to try to square the circle by increasing its opposition to the Abbas UN initiative, and simultaneously attempting to strengthen Abbas through economic aid and the resumption of diplomacy on the peace process front. That might have the chance of some success if the conflict over the UN bid, now presumed to trigger diminished aid to Abbas, can somehow be resolved.

During the Gaza War, President Obama was traveling in Southeast Asia, as part of the administration's vaunted "pivot" to Asia. It's a good policy, but the Middle East followed him there. As the president contemplates new appointments in the foreign policy arena, he will have to consider that just as the U.S. necessarily begins to pay more attention to the Asian front, the conflicts and problems of the Middle East will stubbornly remain. We will be stuck with a very complex region we cannot ignore for a very long time to come.

NEWS,25.5.2012

Higher enrichment at Iranian site

The UN atomic agency has found evidence at an underground bunker in Iran that could mean the country has moved closer to producing the uranium threshold needed to arm nuclear missiles, diplomats said on Friday.The International Atomic Energy Agency (IAEA) has found traces of uranium enriched up to 27% at Iran's Fordo enrichment plant, the diplomats told The Associated Press.That is still substantially below the 90% level needed to make the fissile core of nuclear arms. But it is above Iran's highest-known enrichment grade, which is close to 20%, and which already can be turned into weapons-grade material much more quickly than the Islamic Republic's main stockpile, which can only be used for fuel at around 3.5%.The diplomats - who demanded anonymity because their information is privileged - said the find did not necessarily mean that Iran was covertly raising its enrichment threshold toward weapons-grade level. They said one likely explanation was that the centrifuges that produce enriched uranium initially over-enriched at the start as technicians adjusted their output - an assessment shared by nonproliferation expert David Albright.Albright, whose Washington-based Institute for Science and International Security looks for signs of proliferation, said a new configuration for the cascades set up in tandem at Fordo means they tend to "overshoot 20%" at start up.Sanctions"Nonetheless, embarrassing for Iran," he wrote in an e-mail to the AP.Calls to Ali Asghar Soltanieh, Iran's chief delegate to the IAEA, were rejected and the switchboard operator at the Iranian mission said he was not available. IAEA media officials said the agency had no comment.Iran is under several rounds of UN sanctions for its failure to disclose information on its controversial nuclear programme. Tehran says it is enriching uranium to provide more nuclear energy for its growing population, while the US and other nations fear that Iran doing that to have the ability to make nuclear weapons.The latest attempts to persuade Iran to compromise and let UN experts view its nuclear programme ended inconclusively on Wednesday at a meeting in Baghdad. At the talks, six nations - the United States, Russia, China, Britain, France and Germany - failed to gain traction in efforts to persuade Tehran to freeze its 20% enrichment. Envoys said the group will meet again next month in Moscow.Iran started enriching to 20% last year, mostly at Fordo, saying it needed the material to fuel a research reactor and for medical purposes. HopeStill, its long-standing refusal to stop enrichment and accept reactor fuel from abroad has sparked fears it wants to expand its domestic programme to be able to turn it toward making weapons.Those concerns have increased since it started higher enrichment at Fordo, which is carved into a mountain. That, say Iranian officials, makes it impervious to attack from Israel or the United States, which have not ruled out using force as a last option if diplomacy fails to curb the Islamic Republic's nuclear programme.Even though Wednesday's talks were unproductive, diplomats saw hope in the promise of another meeting."It is clear that we both want to make progress and that there is some common ground," European Union foreign policy chief Catherine Ashton, who is formally leading the talks, told reporters. "However, significant differences remain. Nonetheless, we do agree on the need for further discussion to expand that common ground."Significant differencesSaeed Jalili, Iran's top nuclear negotiator, offered a lukewarm assessment of Wednesday's negotiations, in light of European and American refusal to lift tough sanctions against Iran as Tehran had hoped."The result of the talks was that we were able to get more familiar with the views of each other," Jalili told reporters.In Washington, Secretary of State Hillary Clinton said significant differences remain between the two sides and that it's now up to Iran "to close the gaps"."Iran now has the choice to make: Will it meet its international obligations and give the world confidence about its intentions or not?" Clinton said.Iran went into Wednesday's talks urging the West to scale back on recently toughened sanctions, which have targeted Iran's critical oil exports and have effectively blackballed the country from international banking networks. The 27-nation European Union is set to ban all Iranian fuel imports on 1 July, shutting the door on about 18% of Iran's market.Experiments The diplomats said a confidential IAEA report on Iran's nuclear programme to be released later on Friday to the agency's 35-nation board will mention of the traces of 27% enrichment found at Fordo.Iran already has around 700 centrifuges churning out 20% enriched uranium at Fordo. The diplomats said the report will also note that - while Iran has set up around 350 more centrifuges since late last year, at the site - these machines are not enriching.While the reason for that could be purely technical, it could also serve as a signal from Tehran that it is waiting for progress in the negotiations.The report is also expected to detail the state of talks between the UN nuclear agency and Iran that the agency hopes will re-launch a long-stalled probe into suspicions that Tehran has worked on nuclear-weapons related experiments - charges that Tehran denies.

Next stop Moscow for Iran nuclear talks

Iran and six world powers achieved little in two days of intense nuclear talks in Baghdad except arranging another meeting in Moscow next month and establishing they are poles apart on crucial issues.The latest diplomatic push between Iran and the P5+1 - the United States, Russia, China, Britain, France and Germany - at one stage even looked unlikely to take place until desperate eleventh-hour efforts managed to salvage the process - for now."We remain determined to resolve this problem in the near term through negotiations, and will continue to make every effort to that end," Catherine Ashton, the EU foreign policy chief, said after two "very intense" days of talks."What we have now is some common ground and a meeting in place where we can take that further forward," she said, announcing the next round would take place in Moscow on 18-19 June.She added however that there remained "significant differences" and that Iran must take "concrete and practical steps to urgently meet the concerns of the international community".The main bone of contention was - and will remain in Moscow - the speed at which the P5+1 eases sanctions in return for the Islamic republic scaling back the most sensitive parts of its nuclear programme.SweetenersAshton put forward in the Iraqi capital on behalf of the six powers a new package of proposals that clearly went down badly with the Iranians.The P5+1 want Iran to restrict to purities of 20% the enrichment of uranium, the area of Iran's activities that most raises their suspicions that Iran is seeking to develop a nuclear arsenal.In return reports indicated the international powers are prepared to offer a variety of sweeteners, including fuel plates for a reactor producing medical isotopes, relaxing restrictions on aircraft parts and nuclear safety assistance.But this falls short of the lifting of the whole raft of UN Security Council and unilateral Western sanctions that have been hit Iran's economy for years.Reflecting official thinking in Tehran, state media ran reports slammed the package, with the IRNA news agency calling it as "outdated, not comprehensive, and unbalanced".Iran meanwhile is loath to give up what its chief negotiator in Baghdad, Saeed Jalili called its "absolute right" to uranium enrichment.Oil embargo
In the end, with the Baghdad talks extended several times - they were originally only meant to last one day - the two sides agreed to differ, setting the stage for what may be a make-or-break gathering in the Russian capital.Neither side can afford to keep the process going indefinitely without some tangible progress.Iran is threatened with an EU oil embargo, due to take full effect from 1 July, that will also bar EU firms from insuring crude tankers heading to countries such as India, South Korea and Japan, all major buyers of Iran's oil.Israel, which is widely considered to have the Middle East's sole if undeclared nuclear arsenal, sees itself as Tehran's number-one target if Iran acquires the bomb and is highly sceptical that diplomacy will work.Like the United States, it has refused to rule out military strikes on Iran's nuclear facilities to prevent it developing a weapons capability.Oil prices have risen higher as a result, hurting global growth just as the eurozone crisis threatens to return with a vengeance and as US President Barack Obama seeks re-election in November on the back of an improving economy.Military optionObama, who campaigned in 2008 for his first term promising to reach out to Tehran, is also wary of his Iran policy being branded as soft and a failure by his Republican challenger Mitt Romney."A freeze on new sanctions in exchange for a freeze on new enrichment activity is still possible," Mark Fitzpatrick at the International Institute for Strategic Studies think-tank in London said."The danger is that if they drag on too long, diplomacy will be seen to have failed by many in Israel and elsewhere, which will bring renewed talk of a military option."