"The longer we wait to confront the threat Iran poses, the harder and more intractable it will become to solve," Bolton said.

At issue is Iran's ability to enrich uranium to the point it could be used for a nuclear weapon. Iran insists its nuclear program is peaceful and only meant to generate power. Many in the West, however, fear Iran is aiming to develop atomic weapons.

The International Atomic Energy Agency will meet in Vienna, Austria, on Monday to discuss Iran's nuclear program and its compliance with an IAEA demand that it renounce uranium enrichment. The U.N. agency's board of governors may at that time send the file to the Security Council for further action.

Iranian officials were in Moscow last week, negotiating an offer by Russia to enrich uranium for Iran to be used for energy. The spent fuel would be returned to Russia, easing fears that Iran could use it for weapons.

Bolton said the Russian proposal lets Iran "reap the benefits of civil nuclear power while addressing concerns that they are really pursuing nuclear weapons."

But he said Iran has been engaging in "doublespeak" during these negotiations by saying with one voice it welcomes discussion, but with the other "flatly refusing" to give up access to technology and material to eventually develop nuclear weapons.

Iran "must be made aware that if it continues down the path of international isolation, there will be tangible and painful consequences," Bolton said.

In a speech to a closed meeting of leading Islamic clerics and academics, Hassan Rowhani, who headed talks with the so-called EU3 until last year, revealed how Teheran played for time and tried to dupe the West after its secret nuclear programme was uncovered by the Iranian opposition in 2002.

He boasted that while talks were taking place in Teheran, Iran was able to complete the installation of equipment for conversion of yellowcake - a key stage in the nuclear fuel process - at its Isfahan plant but at the same time convince European diplomats that nothing was afoot.

"From the outset, the Americans kept telling the Europeans, 'The Iranians are lying and deceiving you and they have not told you everything.' The Europeans used to respond, 'We trust them'," he said.

Revelation of Mr Rowhani's remarks comes at an awkward moment for the Iranian government, ahead of a meeting tomorrow of the United Nations' atomic watchdog, which must make a fresh assessment of Iran's banned nuclear operations.



The judgment of the International Atomic Energy Agency (IAEA) is the final step before Iran's case is passed to the UN Security Council, where sanctions may be considered.

In his address to the Supreme Council of Cultural Revolution, Mr Rowhani appears to have been seeking to rebut criticism from hardliners that he gave too much ground in talks with the European troika. The contents of the speech were published in a regime journal that circulates among the ruling elite.

He told his audience: "When we were negotiating with the Europeans in Teheran we were still installing some of the equipment at the Isfahan site. There was plenty of work to be done to complete the site and finish the work there. In reality, by creating a tame situation, we could finish Isfahan."

America and its European allies believe that Iran is clandestinely developing an atomic bomb but Teheran insists it is merely seeking nuclear energy for peaceful purposes. Iran's negotiating team engaged in a last-ditch attempt last week to head off Security Council involvement. In January the regime removed IAEA seals on sensitive nuclear equipment and last month it resumed banned uranium enrichment.

Iran is trying to win support from Russia, which opposes any UN sanctions, having unsuccessfully tried to persuade European leaders to give them more time. Against this backdrop, Mr Rowhani's surprisingly candid comments on Iran's record of obfuscation and delay are illuminating.

He described the regime's quandary in September 2003 when the IAEA had demanded a "complete picture" of its nuclear activities. "The dilemma was if we offered a complete picture, the picture itself could lead us to the UN Security Council," he said. "And not providing a complete picture would also be a violation of the resolution and we could have been referred to the Security Council for not implementing the resolution."

Mr Rowhani disclosed that on at least two occasions the IAEA obtained information on secret nuclear-related experiments from academic papers published by scientists involved in the work.

The Iranians' biggest setback came when Libya secretly negotiated with America and Britain to close down its nuclear operations. Mr Rowhani said that Iran had bought much of its nuclear-related equipment from "the same dealer" - a reference to the network of A Q Khan, the rogue Pakistani atomic scientist. From information supplied by Libya, it became clear that Iran had bought P2 advanced centrifuges.

In a separate development, the opposition National Council of Resistance of Iran (NCRI) has obtained a copy of a confidential parliamentary report making clear that Iranian MPs were also kept in the dark on the nuclear programme, which was funded secretly, outside the normal budgetary process.

Mohammad Mohaddessin, the NCRI's foreign affairs chief, told the Sunday Telegraph: "Rowhani's remarks show that the mullahs wanted to deceive the international community from the onset of negotiations with EU3 - and that the mullahs were fully aware that if they were transparent, the regime's nuclear file would be referred to the UN immediately."

© Copyright of Telegraph Group Limited

The International Atomic Energy Agency (IAEA) will tomorrow confirm Iran's referral to the United Nations Security Council for possible sanctions.

Iran insists it is developing peaceful nuclear energy, a claim regarded as bogus by America and Britain, France and Germany, which believe it wants to develop nuclear weapons. President Mahmoud Ahmadinejad's remarks about wiping Israel "off the map" have added to fears.

America and Israel have warned that they will not tolerate a nuclear-armed Iran. If negotiations fail, both countries have plans of last resort for airstrikes against Iran's widely dispersed nuclear facilities.

Porter Goss, the head of the CIA, visited Recep Erdogan, the prime minister of Turkey, a Nato country, late last year and asked for political, logistical and intelligence support in the event of airstrikes, according to western intelligence sources quoted in the German media.

The news magazine Der Spiegel noted: "Washington appears to be dispatching high-level officials to prepare its allies for a possible attack."

Nato would be likely to operate air defences in Turkey, according to Dan Goure, a Pentagon adviser and vice-president of the Lexington Institute, a military think tank.

A former senior Israeli defence official said he believed all Nato members had contingency plans.

John Pike, director of the US military studies group Globalsecurity.org, said America had little to gain from Nato military help. "I think we are attempting to bring the alliance along politically so that when all diplomatic initiatives have been exhausted and we blow up their sites, we can say, 'Look, we gave it our best shot'."

A senior British defence official said plans to attack Iran were pure speculation. "I don't think anybody has got that far yet," he said. "We're all too distracted by Iraq."

Israel's special forces are said to be operating inside Iran in an urgent attempt to locate the country's secret uranium enrichment sites. "We found several suspected sites last year but there must be more," an Israeli intelligence source said. They are operating from a base in northern Iraq, guarded by Israeli soldiers with the approval of the Americans, according to Israeli sources.

The commander of Israel's nuclear missile submarines warned Iran indirectly in a comment to an Israeli newspaper last week that "we are able to hit strategic targets in a foreign country".

The Israelis fear Iran may reach the "point of no return" - at which it has the capacity to enrich uranium to bomb-grade purity - in the next few months. The Americans are more interested in the point at which Iran is close to developing an actual bomb, thought to be at least three years away.

Two Iranian opposition groups claimed this weekend that Iran had increased its production of Shahab 3 missiles, which have a range of 1,200 miles, sufficient to reach Israel.

Diplomatic efforts to contain Iran are likely to proceed slowly, given Russian and Chinese opposition to punitive action. A Foreign Office official said although the IAEA would refer Iran to the security council, any sanctions would be a "strictly step-by-step process".

The new office will come with posts in Europe and Dubai for Farsi-speaking diplomats as well as extra personnel in Washington working on human rights and public diplomacy.

Within the state department bureaucracy Iran was previously lumped together with countries of the Arabian Peninsular Affairs Office. Its separation, with extra resources, reflects a new emphasis by the Bush administration and the challenge posed by the regime's recent behaviour, a spokesman said. Only a few countries merit their own office within the state department.

The director of the new office has not been named. David Denehy, a special advisor on the Middle East, declined to comment on suggestions that he would head the office.

Mr Denehy is involved in the $50m project to create the first 24-hour Farsi television station to broadcast into Iran.

Elizabeth Cheney, who is leading the state department's "broader Middle East and North Africa initiatives", has been placed in charge of the television project rather than Karen Hughes, one of the president's closest advisors who heads US public diplomacy.

Officials told the FT there was a debate within the state department over whether the Broadcasting Board of Governors (BBG), an independent federal agency, should be given responsibility for the proposed new television station.

BBG's mandate covers "all US government and government sponsored, non-military international broadcasting", and includes Farsi broadcasts by Voice of America radio and television and Radio Farda.

"It's possible the BBG will not get the money," one official commented.

The officials said Ms Cheney wanted the new Farsi station to be kept separate from the BBG so that she could exert more direct control. Ms Cheney is said to be among those who were not satisfied with the oversight role played by the BBG regarding alHurra, the Arabic-language television station which is now the subject of state department and congressional inquiries into its programming and spending.

AlHurra says the inquiries are routine.

Mr Denehy and Ladan Archin, a Pentagon official assigned to the state department, recently visited private Farsi television and radio stations run by exiled Iranians in Los Angeles that broadcast into Iran. Editors said they were seeking information on their operations, setting off excitement among Iranian-Americans that the state department was looking for a suitable private vehicle for its new propaganda effort.

© Copyright The Financial Times Ltd 2006

The question is whether democratic reform can be achieved before Iran becomes a nuclear power. That is the younger Cheney's job. In the State Department she is referred to as the "freedom agenda co-ordinator" and the "democracy czar" for the broader Middle East. "She's fantastic and dynamic," said a colleague.

Her official title is deputy assistant secretary of state for Near Eastern affairs and she is in charge of spending the $85m (£48m) - up from $10m last year - recently allocated to promote democracy in Iran. Much of it will be spent on broadcasting the views of exiles, dissidents and reformers inside Iran.

Cheney is better known to Iranian listeners of Voice of America's Persian service than she is to Americans, although she publicly backed her sister Mary's right to privacy when Democrats made an issue of her lesbianism in the 2004 election.

She rarely gives interviews but set out her agenda in a speech to the Foreign Policy Association's annual dinner last June. Cheney said there was a "direct parallel" between reform movements in the Arab world and Poland's Solidarity in the 1980s, which lit the "spark of freedom" in the Soviet bloc.

A strike by Tehran bus drivers that led to the jailing and torture of Mansour Osanloo, a union leader, and protests by textile workers in the northern province of Gilan have raised hopes that Iranians are fed up with the clerics' repressive rule.

"President (Mahmoud) Ahmadinejad was elected on the basis of a 'chicken in every pot' and there's no sign that he is living up to that," said a senior State Department official. "The patience of people who supported him is going to run out."

Iranian exiles are using the showdown with Tehran over nuclear weapons to build unity among notoriously fractured opposition groups. Reza Pahlavi, the son of the late Shah of Iran, said in Washington last week that democratic regime change was a "race against time".

"Forget about endlessly negotiating with the mullahs," he said. "They will only buy the regime more time and a military strike would be a gift to the clerics. Everybody knows you cannot come away from the precipice without democracy."

Mohsen Sazegara, a former Revolutionary Guard turned reformer who was recently jailed in Iran, said United Nations anti-nuclear sanctions should be linked to improvements in human rights. "Iranians will see that the international community is standing up for the rights of the people of Iran," he said.

Patrick Clawson of the Washington Institute for Near East Policy said Cheney was well qualified for the post. "She has a lot of experience dealing with non-governmental organisations and knows what she is talking about. She is a different person from her father."

Another Washington-based expert on Iran suggested her relationship to Dick Cheney sometimes hampered her work. "Her last name can make things difficult for her because people assume everything you tell her is going to go straight to the vice-president."

Father and daughter will be on the same side if Ahmadinejad's regime sees off its internal opposition and acquires nuclear weapons. "There's no credibility gap over our willingness to use force," a State Department official said, "but hopefully it won't come to that."

The government-owned daily wrote that at a dinner gala with Iranian hoteliers and entrepreneurs, Kohl said that he "heartily agreed" with Ahmadinejad's remarks about the Holocaust.

"What Ahmadinejad said about the Holocaust was in our bosoms", the former German chancellor was quoted as saying. "For years we wanted to say this, but we did not have the courage to speak out".

Ahmadinejad caused an international furore last year when he publicly declared that the Holocaust was a "myth" and threatened that Israel must be "wiped off the map".

His comments were supported by senior Iranian officials, including Supreme Leader Ayatollah Ali Khamenei and former president Ayatollah Ali Akbar Hashemi Rafsanjani.

The country's state-run media have systematically defended the position of the Iranian president and given extensive coverage to historians and "experts" who deny the Holocaust took place.

"... The war on terrorism is worldwide. In Iraq, it's a civil war," said Murtha, a Pennsylvania Democrat.

Murtha, who in November called for the immediate withdrawal of U.S. troops from Iraq, said it was useless for the United States to advise Iraqis.

"One of the problems I see and frustrating things is our ambassador keeps giving advice to the Iraqis," Murtha said. "Every time we give the Iraqis advice, they vote for someone else ... The Iraqis don't pay attention to our advice."

The U.S. role in fighting terrorism around the world is being subverted by Iraq, said Murtha, who characterized the sectarian strife between Iraq's Sunni and Shi'ite Muslims as a civil war that must be settled internally.

Murtha, a decorated Vietnam veteran who retired from the Marines Corps Reserve as a colonel in 1990, said Iraq would do a better job of rooting out terrorists once U.S. troops leave the country.

"I'm convinced they know where they are, they know who they are," he said. "But they won't tell us because they've turned against us. We've lost the hearts and minds of the people."

The United Nations is scrutinizing Iran because of its nuclear research but Murtha said Tehran has become emboldened because of the U.S. focus in Iraq.

"We have a situation where our military is in such bad shape, it couldn't deploy to a second front," Murtha said. "And the Iranians know this. North Korea knows it. China knows it. We're depleting our resources in Iraq."

Marine Gen. Peter Pace, the chairman of the Joint Chiefs of Staff, appeared on NBC's "Meet the Press" on Sunday and said the war in Iraq was going "very, very well" but Murtha was skeptical.

"Why would I believe him?" he said. "This administration, including the president, has mischaracterized this war for the last two years ... So why would I believe the chairman of the Joint Chiefs when he says things are going well?"

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"Research and development forms part of our national interests and sovereignty, and we will not renounce it.

"I don't think Iran's referral to the UN would have any advantages for them (the advocates of such a move). We do not welcome this issue and all our efforts are focused on resolving the case through diplomatic and peaceful channels.

"We don't seek anything beyond our rights," Larijani stressed.

"Iran demands its rights within the framework of the nuclear Non-Proliferation Treaty (NPT) with the supervision of the IAEA."

Commenting on IAEA Director General Mohamed ElBaradei's recent report on Iran's nuclear activities, he said that after three years, the IAEA still has not found any evidence proving that Iran has diverted to a nuclear weapons program.

Asked whether Iran would use oil as a weapon in case of a referral, Larijani replied, "We are not interested in using oil as a weapon because international security is important for us. But, of course, if the situation changes, our decisions and relations will also change."

He added that Iran does not want to withdraw from the NPT.

"We have a positive view of the NPT, on condition that it is implemented correctly. But, seeing the IAEA being used as a tool by powerful countries is not acceptable for us, and if they try to change the current situation, Iran will certainly respond," he observed.

Iranian officials should make the utmost efforts to uphold the country's right to research activities on uranium enrichment, he said.

"If the IAEA or any other organization makes illegal demands of Iran, we will not accept it, but if they offer a formula to restore Iran's rights, we will welcome it.

"What's important is that Iran has acquired nuclear expertise and has reached favorable results in this regard."

On the nuclear negotiations with Moscow concerning its offer to establish a joint uranium enrichment facility on Russian soil, Larijani said that the atmosphere of the talks has been favorable so far, and Iran has not lost hope in reaching an agreement with Russia.

"We have made some good progress in talks, and some agreements have been made on a package to resolve the issue.

"We feel that Russia wants to make efforts to lead Iran's nuclear issue into a logical path."

Larijani noted that the Russian proposal should guarantee Iran's right to research and industrial-scale enrichment on its own soil.

"Our national security doctrine is based on establishing permanent security with our neighbors, and so far we have had favorable ties with Russia."

He noted that the U.S. is concerned about the Iran-Russia cooperation and has magnified the issue of the Security Council since it knows that a referral would bring an end to the negotiations with Russia.

"The U.S. administration needs a new crisis, and in order to divert world public opinion from its disgrace in Iraq, it has embarked on psychological warfare.

"The U.S. wants Iran's nuclear talks with Russia and the European Union three (Britain, Germany, and France) to fail. It is trying to show that another element needs to enter the talks, and that it has to help in order to resolve the issue.

"I view the path of Russia and Europe as far more logical than that of the U.S. since it benefits all sides, and it should not be thought that Iran will back down due to pressure," Larijani said.

"For us, Russian President Vladimir Putin is more reliable than U.S. President George W. Bush," he added.

If the U.S. does enter the scene, it must step wisely so that Iran can have a correct view of its intentions, he noted.

He called on opponents of Iran's research activities to put forward a logical reason for their demand.

"We will be flexible if there is a logical reason, but they can't deprive Iran of its rights through speculation and suspicion and without any evidence.

"The U.S. is worried Iran will build an atom bomb, but no nuclear expert has asserted that Iran could produce a bomb during the stage of research and development.

"We will not back down if they refer us to the UN, or even if they impose sanctions or wage a war, since we have developed nuclear technology.

"Through such measures they will only reduce the level of supervision," Larijani stated.

He noted that Iran would not give a positive response to bullying and threats but would respond positively to efforts to resolve the issue logically.

"We are patient, but we realize when the issue is really a suspicion and when it is really a pretext. We will respond to the questions but will not allow anyone to raise pretexts."

Larijani stated that so far Iran has passed three stages: extraction of yellow cake at the mines, conversion of yellow cake to UF6, and nuclear research and development.

ElBaradei has clearly acknowledged that Iran has acquired nuclear expertise, he said.

Larijani also denied that any discussions had been held with the EU on a suspension of Iran's nuclear activities for a specific period of time.

"We will not accept a suspension of nuclear research, but we can accept suspending industrial-scale production for a short period if certain concerns are taken into consideration."

The Russian stood out like a poor eastern cousin on Vienna's jeweled cityscape.

He was a nuclear engineer who had defected to the United States years earlier and quietly settled in America. He went through the CIA's defector resettlement program and endured long debriefings in which CIA experts and scientists from the national laboratories tried to drain him of everything he knew about the status of Russia's nuclear weapons program. Like many other Russian defectors before him, his tiresome complaints about money and status had gained him a reputation within the CIA of being difficult to manage. But he was too valuable for the CIA to toss away...

So despite their disputes, the CIA had arranged for the Russian to become an American citizen and had kept him on the payroll, to the tune of $5,000 (U.S.) a month. It really did seem like easy money, with few strings attached. Life was good. He was happy to be on the CIA gravy train.

Until now. The CIA was placing him on the front lines of a plan that seemed to be completely at odds with the interests of the United States, and it had taken a lot of persuading by his CIA case officer to convince him to go through with what appeared to be a rogue operation.

The code name for this operation was MERLIN...

The Russian's assignment from the CIA was to pose as an unemployed and greedy scientist who was willing to sell his soul - and the secrets of the atomic bomb - to the highest bidder. By hook or by crook, the CIA told him, he was to get the nuclear blueprints to the Iranians. They would quickly recognize their value and rush them back to their superiors in Tehran.

The plan had been laid out for the defector during a CIA-financed trip to San Francisco, where he had meetings with CIA officers and nuclear experts mixed in with leisurely wine-tasting trips to Sonoma County. In a luxurious San Francisco hotel room, a senior CIA official involved in the operation walked the Russian through the details of the plan. He brought in experts from one of the national laboratories to go over the blueprints that he was supposed to give the Iranians.

The senior CIA officer could see that the Russian was nervous, and so he tried to downplay the significance of what they were asking him to do. He told the Russian that the CIA was mounting the operation simply to find out where the Iranians are with their nuclear program. This was just an intelligence-gathering effort, the CIA officer said, not an illegal attempt to give Iran the bomb.

At the case officer's urging, the Russian started sending messages to Iranian scientists, scholars, and even Iranian diplomats stationed at the IAEA (International Atomic Energy Agency) in Vienna.

As he mingled with scientists and other academics, the Russian picked up business cards and email addresses. The Russian began to email his new contacts, sending intriguing messages explaining that he wanted to talk with them about his ability to provide materials of interest to Iran. Finally, at one conference, he hit pay dirt when he met a physics professor visiting from Tehran.

The Russian followed up his chance encounter with emails to the scientist back at his university in Iran. The Russian explained that he had information that was extremely important, and he wanted to make an offer. After some delays, the Iranian finally responded, with a wary message, asking what he had in mind. That was enough for the CIA. Now the Russian could tell Iranian officials in Vienna that he had been in touch with a respected scientist in Tehran before he showed up on their doorstep. The CIA had discovered that a high-ranking Iranian official would be travelling to Vienna and visiting the Iranian mission to the IAEA, and so the agency decided to take the next step and send the Russian to Vienna at the same time. It was hoped that he could make contact with either the Iranian ambassador to the IAEA or the visitor from Tehran.

The CIA sent him to Vienna without any backup...

Only a handful of CIA officers knew of the existence of MERLIN.

Better to let the Russian get lost and fumble his way around town than tell more officers about the operation.

He could not stop thinking about his trip to San Francisco, when he had studied the blueprints the CIA had given him. Within minutes of being handed the designs, he had identified a flaw. "This isn't right," he told the CIA officers gathered around the hotel room.

"There is something wrong." His comments prompted stony looks, but no straight answers from the CIA men in the room... After their trip to San Francisco, the case officer handed the Russian a sealed envelope with the nuclear blueprints inside. The Russian was told not to open the envelope under any circumstances. He was to follow the CIA's instructions to find the Iranians and give them the envelope with the documents inside. Keep it simple, and get out of Vienna safe and alive, the Russian was told. But the defector was more worried than ever about what kind of game the CIA was getting him into. And he had his own ideas about how he might play that game.

In Vienna, the Russian went over his options one more time and made a decision. He unsealed the envelope with the nuclear blueprints and included a personal letter of his own to the Iranians. No matter what the CIA told him, he was going to hedge his bets. There was obviously something wrong with these blueprints - so he decided to mention that fact to the Iranians in a letter. They would certainly find flaws for themselves, and if he didn't tell them first, they would never want to deal with him again...

The Russian slid his letter in with the blueprints and resealed the envelope.

After his day of floundering around Vienna, the Russian returned to his hotel, near the city's large Stadtpark. He did a computer search and found the right street address for the Iranian mission. His courage bolstered, he decided he would go back and finish the job in the morning.

He found 19 Heinstrasse...

The only proof that this was the right place was a mail directory, with three rows of tenants' names on the wall beside the building's front door. Amid the list of Austrian tenants, there was one simple line: PM/Iran." The Iranians clearly didn't want publicity.

The Russian slipped through the front door, and hurriedly shoved his envelope through the inner door slot at the Iranian office. The Russian fled the mission without being seen. He was deeply relieved that he had finally made the handoff without ever having to come face to face with a real live Iranian. He flew back to the U.S. without being detected by either Austrian security or, more important, by Iranian intelligence...

Just days after the Russian dropped off his package at the Iranian mission, the NSA (National Security Agency) reported that an Iranian official in Vienna abruptly changed his schedule and suddenly made airline reservations and flew home to Iran. The odds were that the nuclear blueprints were now in Tehran.

From STATE OF WAR by James Risen. Copyright © 2006 by James Risen. Reprinted by permission of Free Press, a Division of Simon & Schuster, Inc., NY.

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