QUESTION: Should we be imposing a trade embargo on Iran and not allowing World Bank loans as Congressman Sherman suggests?

JACK STRAW: No, that's not our policy and may I also say that it's not the policy I think of the US Administration. I've got a note here to say that Senator Richard Lugar, who's Chairman of the Senate Foreign Relations Committee, said yesterday that whilst he supported reform in Iran he and the Administration did not support the proposed Bill and he continued change had to come about through the Iranian people.

Now our approach in any event has been different from the US Administration. It's very well known. It is one of constructive and conditional engagement with the Government of Iran and although it's a slow process I think there are some indications that it's had some effect.

Now on this issue of the Iranians' possible nuclear systems what we have said to the Iranians, I've said personally to Kemal Kharrazi, the Iranian Foreign Minister, is look if it is correct that you have nothing to hide then you have nothing to fear by the kind of enhanced inspections which now the whole world wishes you to undertake. This is not just the US and it's important in terms of internal Iranian politics that it's not just seen as the US, but it's the G8 countries including Russia and the European Union and we want Iran to sign to what's called an additional protocol which essentially is enhanced, more intrusive inspections of the kind that most of us have accepted in the past.

May I just make one other point which actually brought out rather interesting in a Daily Telegraph editorial this morning which is that Iran is often presented as a totalitarian state, well as the Daily Telegraph is saying this morning it's not a totalitarian state. There's a great deal of opposition with that part of the Government which is not elected, which is the religious authority.

But the other thing that's happening, in a sense it's reflected in the protests on the streets, is Iran in any event is a country under going major demographic transition because so many of their population, seventy per cent at the latest estimate, is under thirty and that in itself is going to push Iran towards the process of reform and greater liberalisation. But the last point I'd just make is this - and if you don't understand this about Iran one understands nothing - that given the long history of Iran they have to be allowed to sort out their opposition internally and the thing that would most derail process towards the establishment of a better democracy in Iran would be suggestions that the opposition there was being orchestrated from the outside which happily so far it has not been.

QUESTION: So we just watch from outside we do nothing.

JACK STRAW: No that wasn't what I said. What I said was that we should engage in constructive and conditional engagement. What we also have said and we've said now this now for two years is that Iran wants a trade and cooperation agreement with the European Union. We have linked that very closely to progress on human rights and for example to progress on the kind of weapons inspections which they are going to allow under the International Atomic Agency authority. Now we had an interim review really of progress. It's not been satisfactory. We will look again following negotiations with Iran in the autumn to see how far they've got.

QUESTION: And if they don't sign up to that protocol what happens then?

JACK STRAW: It is inevitable from Iran's point of view that if they are not making progress on each of these tracks, on human rights and on cooperation with the IAEA as well as progress on the trade negotiations then it is highly probably that European Ministers will decide to have to park the negotiations on the trade and cooperation agreement and it's something which very much the Iranians want. But we've made that clear from the start.

QUESTION: I want to bring you on to the, to the question of Europe on which you are speaking in the next few days. An ICM poll in the Daily Mail says that ninety per cent of people want a referendum on the European constitution. Now the position of the Government has been clear but given the strength of feeling on this are you prepared to at least consider that a referendum is what the people want and therefore what you might be prepared to do?

JACK STRAW: Well our position is to say that we do not believe that there is a case for a referendum and let me explain why. We've had referendum for the United Kingdom as a whole only on one occasion in the past and that was on the very categorical open and shut issue of whether we stayed in the then Common Market. That was in 1975.

We are proposing a referendum in respect of the single currency which on any basis would be a major constitutional as well as economic change, whether you lose direct control over your currency and the issue also is one which can easily be put in a referendum, do you kept the pound or do you go for the euro. But we've never had referenda on this kind of treaty because they have not fundamentally shifted the balance of power between member states like the United Kingdom and the Union.

QUESTION: But can I just bring, the current arrangement if it's accepted as it is would end the veto on tax issues and put forward a common foreign and defence policy. Now I know you are fighting against that, but if you are not successful would you then allow it to go towards a referendum because that would suggest a shift in the balance of power.

JACK STRAW: Well first of all on common foreign and defence policy. The present articles, draft articles make it clear that that is inter governmental and subject to unanimity. It was Maastricht which introduced the concept of a common foreign and defence policy, but we are absolutely clear it has to be inter governmental, everybody else accepts that. So that is unlikely to be an issue in the discussions on the treaty.

As for tax we've made it clear that this is a red line we simply won't sign up to a treaty which includes further harmonisation beyond that which already exists in respect of tax policy. And one important point I'd like to make is that in some respects this new set of proposals which are going to have to be the subject of many months of further negotiation in an inter governmental conference subject to unanimity, these new proposals actually shift to a degree power back towards nation states, so in a sense we're trying to create our kind of Europe, a Council of Nations.

And there are to some degrees better safeguards for member states than there were in the previous treaties and there, for example in particular very important proposal by which national Parliaments can show the yellow card to the European Commission if they believe that proposed laws from the European Commission going to the Council of Nations, Council of Ministers, go too far. And the idea by the way of a President of the European Council is not to have a President of a super state, far from it, but to have a strong figure representing the European Council, the Council of Nations better to counter balance the permanent Civil Service in the European Commission.