. . .

QUESTION: Have there been any developments since your news conference last night on Iran and the enhanced packages? I noticed that there's been -- there's a new Board of Governors meeting coming and there's going to be a new report that comes out possibly as early as tomorrow that talks about non -- Iranian noncompliance with the past activities. What do you make of that?

FOREIGN SECRETARY MILIBAND: I think that's -- there's no development in terms of the package, but I do think that the point that we both made yesterday that this is serious enough that we want to do it bilaterally with the Iranian Government, not by megaphone through the media, is important. That's a little disappointing for you, but I think it's important.

On the IAEA question, I think that is very significant actually because, you know, five or six months ago people were saying to us the Iranians were saying that they've squared away the IAEA, that they've only got a "political problem" with the UN Security Council and that the independent IAEA have cleared them of misdeeds. Actually, what's clear is that the IAEA have reached a really important point with the Iranians where they're not getting answers on the outstanding issues and on the additional protocol, the outstanding issues relating to previous illegal studies that go to the heart of the issue of confidence that the international community can have with the Iranian regime.

And I think it's important that we keep stressing that Iran is not the victim of an international vendetta; it's actually the author of its own misdeeds. And they are being exposed by the work that IAEA officials are doing, and so we look forward, obviously, to the report tomorrow or whenever it comes out. And I think that's part of the context for this determination that we've got to pursue the twin-track policy that we think is the right one.

SECRETARY RICE: I would essentially have nothing to add. I think that's exactly right.

QUESTION: So you've seen or you're aware of what -- the conclusions of the report?

SECRETARY RICE: I've not seen the report. I've seen reports about the report. And again, IAEA cooperation has been one of the central elements of the twin-track policy. It's been both the resolution on suspension and complete and transparent cooperation with the IAEA. So this would be a very serious matter.

QUESTION: Do you think this will strengthen, possibly, your hand in going in to the Iranians with an enhanced -- re -- what is it called, the reformatted -- refreshed --

SECRETARY RICE: Well, let's wait and see what the report says. And we're going to continue our consultations. But I don't think any of us have always assumed that this was going to go smoothly with the Iranians and any time that there is an issue of noncompliance, we're going to press it.

You know what? We can go and sit down, if you'd like. Do you all want to come up and we can sit down there so we don't have to bump around? We're going to go up front where we can sit down. (Break.)

All right. So we can continue now.

QUESTION: Just to get back to Iran, do you think that -- it seems to be taking the Iranians quite a long time to fix a time to get this refreshed package delivered. Do you see that as stalling tactics on behalf of the Iranians? Do you think that they are just sort of, for want of a better expression, messing around with you?

QUESTION: (Off-mike.)

FOREIGN SECRETARY MILIBAND: I don't think it's a matter of messing around. I think that we should -- we've been really determined that the substance of this package gets addressed, and I think none of us and none of our foreign minister colleagues are going to say anything that gives an excuse for the package not to be addressed. So we're going to be incredibly diplomatic about the work that's going on to get this meeting fixed because I think it's important. Remember, June the 2nd is the expiry of the time following the 1803, so that's important. So I think that the fact that we've not just -- that we've received the Iranian letter and just held on to it and well, wait and see ours. We're not interested in a rhetorical -- as I said yesterday, a rhetorical volleyball match. What we're interested in is serious engagement.

I do think that the IAEA is relevant in all this, but I think that it shows that there's a seriousness of purpose across the international community and there's a seriousness of professional purpose for the people paid to do this work as well as from the politicians on the UN.

QUESTION: Madame Secretary, you said yesterday that Iran had a choice; otherwise, it would face serious consequences. What would those consequences be? People are saying that at the UN the next round of sanctions will be a lot tougher, will have much more teeth, if the Iranians don't make, as you say, the right choice.

SECRETARY RICE: Well, I actually think the Iranians have already faced consequences. The problems that they're having in accessing the international financial system, the problems that they're having getting investment in what is a terribly creaky oil and gas and refining infrastructure, the fact that there's been on and off rationing of energy supply in Iran, I think these are all signs of an Iranian economy that is starting to have real difficulties because both the Security Council resolutions and what I've called the collateral effects of those Security Council resolutions; for instance, the German decision to diminish or to begin to pull back on export credits, the fact that the Japanese cut their investment in Azadegan oil -- or gas fields. So I think they have already faced consequences, but I think there is no doubt that there are further steps that the coalition of states that have been working this could take within the Security Council framework if Iran is not prepared to accept the really quite favorable and quite generous package that has been offered to it.

One thing that we want to do eventually is to have the Iranian people understand the bad tradeoffs that are being made on their behalf, because there is somehow out there, for instance, an argument by the Iranian regime that the "West," which I guess includes China and Russia, is trying to deny them technology, trying to keep them backward, trying to prevent them from having civil nuclear power. And of course, nothing could be further from the truth. This is about denying the technologies that would lead to a nuclear weapon, not about denying civil nuclear power or technology. It could be a very fruitful technological relationship, even on some nuclear matters if -- for instance, you know, one could imagine medical research and the like. So this idea that somehow we're trying to -- that we undervalue Iran as a capable and proud state is just not right, and we're going to have to make that case. But I think they are already paying consequences, and of course, there are other possible courses available to us.

QUESTION: Are you looking at more unilateral sanctions, more designations?

SECRETARY RICE: We'll continue to designate entities as we find them trying to use the international financial system for ill-gotten gains. And yes, we're going to continue to do it and we're going to continue to do it aggressively because Iran should not be in a position of using the banking system to pass profits made from terrorism or proliferation.

QUESTION: Is there anything imminent on that score? Is there anything imminent on that?

SECRETARY RICE: We continue to assess it practically every day. And Hank Paulson and I are in very close contact about when -- you know, this is not something we do as a political matter. This is something we do because the international financial system has got to keep its integrity. And so when Treasury believes that we have an issue of the integrity of the international financial system, we act.

QUESTION: But without naming anything, is there some --

SECRETARY RICE: It's important that I not get out ahead of any designations that we might make.

. . .