Mr. Chairman,

The Director General has presented us his report. What it conveys is simple and direct.

- Iran has taken none of the steps that the Board deemed necessary last September, and again in February.

- The quality of Iran's cooperation with the Agency has seriously declined.

- Iran has failed to comply with UN Security Council Resolution 1696. That resolution makes suspension of enrichment-related activities no longer a voluntary confidence-building measure but mandatory.

- And, Iran continues to press ahead to master enrichment in defiance of not only the Board, but also the UN Security Council.

Mr. Chairman, the Director General's recent report describes numerous instances of Iran's failure to cooperate with the Agency. Iran is failing to resolve the outstanding questions about its nuclear program, and Iran is increasingly impeding even routine types of access under its Safeguards Agreement. There are at least a dozen examples of Iran's recent attempts to obstruct the work of inspectors, but let me highlight a few:

- Iran refused the Agency's access to operating records at the Pilot Fuel Enrichment Plant at Natanz. Iran also continues to decline remote monitoring, and initially declined Agency's request to carry out a Design Information Verification visit.

- Iran has made no new information available to the Agency on its P-1 and P-2 programs or the Green Salt Project. Iran is withholding information necessary to assist the Agency in clarifying the implications of Iran's plutonium separation experiments.

- In April, Iran said that it would provide the Agency with a timetable to facilitate progress in resolving outstanding issues. To date, no timetable has been received.

- Iran refuses to provide to the Agency a copy of the 15-page uranium hemispheres document, or to allow note-taking about its contents. Instead, Iranian authorities confiscated and destroyed the inspectors' notes. At the technical briefing last week, DDG Heinonen said that this document undoubtedly relates to the fabrication of components for nuclear weapons.

The Director General's report further documents that activities related to uranium enrichment are continuing, including the installation of another 164-machine cascade that Iran says could be operational this month. To our dismay, Iran loaded another batch of uranium hexafluoride into its 164-machine cascade just seven days before August 31, the date the UN Security Council set as the deadline for Iran's compliance with Resolution 1696, which included the suspension of all enrichment related and reprocessing activities. Iran also acknowledged that it is researching and developing advanced centrifuge design and operation, so called "P-2" centrifuges, and has refused to describe the scope or status of that work and to submit it to IAEA monitoring. This approach continues a pattern of Iran's failure to admit and explain its procurement of centrifuge technology and blueprints from the A.Q. Khan network.

In addition, the construction of the Arak reactor continues despite calls by the Board for Iran to reconsider it. And, new anomalies have arisen. In particular, Iran moved a 48X uranium hexafluoride cylinder in and out of one of the withdrawal stations at the Pilot Fuel Enrichment Plant at Natanz without prior notification to the Agency. As the DG reported, this has led to a lapse in the Agency's ability to monitor and verify the nuclear material in the process. Although the DG also reports that this anomaly has been closed, we would welcome further information from the Secretariat on whether Iran could have diverted a small amount of uranium hexafluoride for use in undeclared tests, such as with P2 centrifuge R&D that Iran refuses to discuss with the IAEA.

Mr. Chairman, we are convinced that Iran is aggressively pursuing the technology, material, and know-how to build nuclear weapons. As of April 2006, Iran had already produced approximately 120 tons of uranium hexafluoride. It is undertaking a new conversion campaign involving 160 tons of uranium ore. The two campaigns will produce sufficient uranium hexafluoride, if successfully enriched, to produce enough highly-enriched uranium for approximately 40 nuclear weapons.

The report underscores that "Iran has not addressed the long outstanding verification issues or provided the necessary transparency to remove uncertainties associated with some of its activities… [T]he Agency remains unable to make further progress in its efforts to verify the correctness and completeness of Iran's declarations with a view to confirming the peaceful nature of Iran's nuclear programme."

Mr. Chairman, in operative paragraph six of UN Security Council Resolution 1696, the Security Council "[e]xpresses its determination to reinforce the authority of the IAEA process…" The Resolution also "underlines the necessity of the IAEA continuing its work to clarify all outstanding issues relating to Iran's nuclear programme, and calls upon Iran to act in accordance with the provisions of the Additional Protocol and to implement without delay all transparency measures as the IAEA may request in support of its ongoing investigations."

Rather than limiting inspection access, Iran should implement the Additional Protocol. We encourage the Secretariat to use the full extent of its authorities to investigate Iran's nuclear program and urge the Director General to report to the Board whether additional authorities are necessary.

Iran must abandon its quest for nuclear weapons and fully meet its nonproliferation obligations. With that goal in mind, we have worked with Europe, Russia, China, and other like-minded countries to present Iran's leaders with a clear choice.

The negative choice is for Iran's leadership to maintain its present course of defiance - violating the mandatory conditions laid out by the international community.

The positive choice is for Iran's leaders to cooperate and take tangible steps to assure the international community that their nuclear program is peaceful. Iran must address the confidence deficit that has been created by its failure to comply with IAEA and Security Council demands to fully and verifiably suspend all enrichment related and reprocessing activities.

We do not seek to deny Iran nuclear energy. But Iran's pursuit of nuclear energy must be in conformity with Iran's commitments and international obligations. If Iran's goal is the development of peaceful nuclear energy, as it has claimed, it is difficult to understand why its leaders did not accept the very generous Six-Country offer of state-of-the-art power reactors and an assured supply of nuclear fuel.

Iran's refusal to suspend and its refusal to cooperate is a choice of confrontation over one of negotiation. The international community has stressed to Iran's leaders, repeatedly and clearly, that this course would bring no reward, but result in further isolation and sanctions. Indeed, operative paragraph eight of UN Security Council resolution 1696 makes abundantly clear the Council's intention to pursue measures under Article 41 of Chapter VII of the UN Charter if Iran fails to comply with the Resolution.

Given Iran's history of deception, lack of transparency, provocative behavior, and disregard for its international obligations, we must take further steps to persuade Iran to abandon its nuclear weapons ambitions. Iran's current course is a deep concern to us all and the time has come for the Security Council to back international diplomacy with international sanctions.

Sanctions will not signal an end to diplomacy. Rather, they would be an essential element of diplomacy to signal to the leaders in Iran that their continued defiance of the international community will not be tolerated. Iran's leaders must understand that their choices have consequences and that their best choice remains the course of cooperation. Iran can still make the right choice and avoid the consequences of further UN Security Council action. The diplomatic track is still open to Iran. It knows what needs to be done.

The United States remains committed to a diplomatic solution. But the world cannot accept a nuclear-armed Iran. If Iran crosses the threshold of perfecting uranium enrichment, our task will be even more difficult. We have engaged in a determined and sustained diplomatic effort that will continue at the Security Council through the imposition of international sanctions. The world is united in its resolve to stop Iran from obtaining a nuclear weapons capability.