Iran, other Mideast states hit by computer virus

Muslim women at computer lab

LONDON (AP) -- Iran and other Middle East countries have been hit with a cunning computer virus that can eavesdrop on computer users and their co-workers and filch information from nearby cellphones, cybersecurity experts said Tuesday. And suspicion immediately fell on Israel as the culprit.

The Russian Internet security firm Kaspersky Lab ZAO said the "Flame" virus is unprecedented in size and complexity, with researcher Roel Schouwenberg marveling at its versatility.

"It can be used to spy on everything that a user is doing," he said.

Computers in Iran appear to have been particularly affected, and Kaspersky's conclusion that the virus was crafted at the behest of a national government fueled speculation it could be part of an Israeli-backed campaign of electronic sabotage against the Jewish state's archenemy.

The virus can activate a computer's audio systems to listen in on Skype calls or office chatter. It can also take screenshots, log keystrokes and - in one of its more novel functions- steal data from Bluetooth-enabled cellphones.

Schouwenberg said there is evidence to suggest that the people behind Flame also helped craft Stuxnet, a virus that is believed to have attacked nuclear centrifuges in Iran in 2010. Many suspect Stuxnet was the work of Israeli intelligence.

Tehran has not said whether it lost any data to Flame, but a unit of the Iranian communications and information technology ministry said it has produced an anti-virus capable of identifying and removing Flame from its computers.

Israel's vice premier did little to deflect suspicion about the country's possible involvement in the cyberattack.

"Whoever sees the Iranian threat as a significant threat is likely to take various steps, including these, to hobble it," Moshe Yaalon told Army Radio when asked about Flame. "Israel is blessed with high technology, and we boast tools that open all sorts of opportunities for us."

Researchers not involved in Flame's discovery were more skeptical of its sophistication than Kaspersky, with Richard Bejtlich of Virginia-based Mandiant saying the virus appeared similar to spyware used by the German government to monitor criminal suspects.

"There have been tools like this employed by high-end teams for many years," he said.

Colorado-based Webroot said the virus wasn't as complex or as stealthy as Stuxnet and was "a relatively easy threat to identify."

Flame is unusually large. Malicious programs collected by the British security firm Sophos averaged about 340 kilobytes in 2010, the same year that Kaspersky believes Flame first started spreading. Flame is 20 megabytes - nearly 60 times that figure.

Alan Woodward, a professor of computing at the University of Surrey in England, said functions can be added or subtracted to the virus depending on what kind of espionage is desired, not unlike the way apps can be downloaded to a smartphone.

He was particularly struck by Flame's ability to turn an infected computer into a kind of "industrial vacuum cleaner," copying data from vulnerable cellphones or other Bluetooth wireless devices left near it.

"I don't believe I've seen it before," he said.

Udi Mokady, chief executive of Cyber-Ark, an Israeli developer of information security, said he believes four countries, in no particular order, have the know-how to develop so sophisticated a weapon: Israel, the U.S., China and Russia.

"It was 20 times more sophisticated than Stuxnet," with thousands of lines of code that took a large team, ample funding and months, if not years, to develop, he said. "It's a live program that communicates back to its master. It asks, `Where should I go? What should I do now?' It's really almost like a science fiction movie."

It's not clear exactly what the virus was targeting. Kaspersky said it detected the program in hundreds of computers, mainly in Iran but also in Israel, the Palestinian territories, Sudan, Syria, Lebanon, Saudi Arabia and Egypt.

The company would not give details on the victims except to say that they "range from individuals to certain state-related organizations or educational institutions."

Schouwenberg said stolen data was being sent to some 80 different servers, something that would give the virus' controllers time to adjust their tactics if they were discovered.

As for Flame's purpose, "maybe it's just espionage," he said. "Maybe it's also sabotage."

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Iran Says Is Building Copy of Captured US Drone

US Drone captured by Iran

Iran claimed Sunday that it had reverse-engineered an American spy drone captured by its armed forces last year and has begun building a copy.

Gen. Amir Ali Hajizadeh, chief of the aerospace division of the powerful Revolutionary Guards, related what he said were details of the aircraft's operational history to prove his claim that Tehran's military experts had extracted data from the U.S. RQ-170 Sentinel captured in December in eastern Iran, state television reported.

Among the drone's past missions, he said, was surveillance of the compound in northwest Pakistan in which Osama Bin Laden lived and was killed.

Tehran has flaunted the capture of the Sentinel, a top-secret surveillance drone with stealth technology, as a victory for Iran and a defeat for the United States in a complicated intelligence and technological battle.

U.S. officials have acknowledged losing the drone. They have said Iran will find it hard to exploit any data and technology aboard it because of measures taken to limit the intelligence value of drones operating over hostile territory.

Hajizadeh told state television that the captured surveillance drone is a "national asset" for Iran and that he could not reveal full technical details. But he did provide some samples of the data that he claimed Iranian experts had recovered.

"There is almost no part hidden to us in this aircraft. We recovered part of the data that had been erased. There were many codes and characters. But we deciphered them by the grace of God," Hajizadeh said.

He said all operations carried out by the drone had been recorded in the memory of the aircraft, including maintenance and testing.

Hajizadeh claimed that the drone flew over Osama Bin Laden's compound in Pakistan two weeks before the al-Qaida leader was killed there in May 2011 by U.S. Navy SEALs. He did not say how the Iranian experts knew this.

Before that, he said, "this drone was in California on Oct. 16, 2010, for some technical work and was taken to Kandahar in Afghanistan on Nov. 18, 2010. It conducted flights there but apparently faced problems and (U.S. experts) were unable to fix it," he said.

Hajizadeh said the drone was taken to Los Angeles in December 2010 where sensors of the aircraft underwent testing at an aerospace factory.

"If we had not achieved access to software and hardware of this aircraft, we would be unable to get these details. Our experts are fully dominant over sections and programs of this plane," he said. "It's not that we can bring down a drone but cannot recover the data."

There are concerns in the U.S. that Iran or other states may be able to reverse-engineer the chemical composition of the drone's radar-deflecting paint or the aircraft's sophisticated optics technology that allows operators to positively identify terror suspects from tens of thousands of feet in the air.

There are also worries that adversaries may be able to hack into the drone's database, as Iran claimed to have done. Some surveillance technologies allow video to stream through to operators on the ground but do not store much collected data. If they do, it is encrypted.

Media reports claimed this week that Russia and China have asked Tehran to provide them with information on the drone but Iran's Defense Ministry denied this.

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China's ZTE planned U.S. computer sale to Iran

ZTE Corporation

(Reuters) - China's ZTE Corp, which recently sold Iran's largest telecommunications firm a powerful surveillance system, later agreed to ship to Iran millions of dollars worth of embargoed U.S. computer equipment, documents show.

The American components were part of an 8 million euro ($10.5 million) equipment-supply contract, dated June 30, 2011, between ZTE, a Chinese trading firm and a unit of the consortium that controls the Iranian telecom, Telecommunication Co. of Iran, according to documents reviewed by Reuters. ZTE is China's second-largest telecommunications equipment maker.

The documents shed further light on how Iran obtains sophisticated American tech products despite U.S. sanctions on Iran. China is a major conduit. Reuters in March revealed an earlier deal between ZTE and TCI, which centered on non-American surveillance equipment but also included some U.S. tech goods. The latest deal, though smaller in scale, was much more reliant on U.S. products.

Beijing and Moscow have vetoed Western attempts to strengthen sanctions against Iran over its nuclear-development program. ZTE, based in the city of Shenzhen, is publicly traded but its largest shareholder is a Chinese state-owned enterprise.

According to the contract's parts list, the equipment to be delivered from China included IBM servers; switches made by Cisco Systems Inc and Brocade Communications Systems Inc; database software from Oracle Corp and a unit of EMC Corp; Symantec back-up and ant-virus software; and a Juniper Networks firewall. The parts were intended for business-support services, including a ZTE billing system.

A spokesman for ZTE said last week in an email that "as far as we know" the company had not yet shipped any of the products. Asked if ZTE intended to do so, he emailed a new statement Monday that said: "We have no intention to implement this contract or ship the products."

He also said ZTE decided "to abandon" the agreement after "we realized that the contract involved some U.S. embargoed products."

The contract had made clear the American provenance of the goods: Its accompanying parts list, signed by ZTE, lists more than 20 different computer products from U.S. companies. Washington has banned the sale of such goods to Iran for years.

U.S. companies that responded to requests for comment said they were not aware of the Iranian contract; several said they were investigating the matter.

A spokesman for IBM said: "Our agreements with ZTE specifically prohibit ZTE from the transfer of IBM products to Iran. If any of IBM's business partners are breaching our export compliance agreements, then IBM will take appropriate actions."

A Brocade spokesman said the company doesn't sell any products to Iran "and we certainly have not shipped these products to" ZTE. A spokesman for Greenplum, the EMC unit, said: "We have no knowledge of the contract described, but are actively researching this matter." A Cisco spokesman said: "We continue to investigate this matter, as any violation of U.S. export controls is a very serious matter."

According to the U.S. Treasury Dept., a U.S. company would violate sanctions if it shipped products requiring an export license to a third party knowing the goods would end up in Iran.

The United States, Europe and the United Nations have been imposing increasingly tough economic sanctions on Iran to pressure it to refrain from developing nuclear weapons, which Iran denies it is doing. The five permanent members of the U.N. Security Council - the U.S., China, Russia, Britain and France - plus Germany are scheduled to hold talks with Iran Saturday in Istanbul over its nuclear program, which it maintains is peaceful.

Reuters reported on March 22 that ZTE had sold Iran's TCI a surveillance system capable of monitoring landline, mobile and internet communications. The system was part of a 98.6 million euro ($128.9 million) contract for networking equipment signed in December 2010.

The article reported that despite a longtime U.S. sales ban on tech products to Iran, ZTE's "Packing List" for the contract, dated July 24, 2011, also included numerous American hardware and software products, although they were not part of the surveillance system.

The U.S. product makers - which included Microsoft Corp, Hewlett-Packard Co and Dell Inc, among others - all said they were not aware of the Iranian contract, and several said they were investigating the matter.

The day after the article was published, a ZTE spokesman said the company would "curtail" its business in Iran. The company later issued a statement saying, "ZTE no longer seeks new customers in Iran and limits business activities with existing customers."

Three other telecommunications equipment makers - Ericsson, Nokia Siemens Networks and China-based Huawei Technologies - previously have said they would reduce their business in Iran. Huawei and ZTE have emerged as the largest equipment suppliers to Iran, according to people involved with the country's telecom industry.

The parts list for the June 2011 contract was much more dominated by U.S. products than the earlier equipment contract. The earlier pact was between TCI, ZTE and a Chinese trading company called Beijing 8-Star International Co. The latest contract was between ZTE, Beijing 8-Star and an Iranian company called Aryacell.

Aryacell is a unit of Iran Mobin Electronic Development Co., part of a consortium that controls TCI along with the Iranian government. According to the contract, Beijing 8-Star was required to provide "third-party equipments," while ZTE was responsible for supplying equipment and collecting payment. The contract was to last until December 31, 2015.

Officials at Aryacell and TCI did not respond to requests for comment. A representative of Beijing 8-Star, reached in China, declined to answer questions, saying: "Concerning my business matters, it's not necessary for me to tell you anything."

The contract's parts list included products made by manufacturers from several countries. But most were from the U.S., with IBM items accounting for the bulk of them. The IBM parts included 30 servers and other computer equipment with a total cost of more than 6.8 million euros ($8.9 million), minus about a 30 percent discount.

Several of the IBM server models, though new, were discontinued shortly before the contract was signed. It called for a 12-month warranty on all equipment.

It is not clear how ZTE will get out of the contract. According to the terms, the contract only can be terminated if Aryacell breaches it, becomes bankrupt or can't pay its debts.

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Obama, Netanyahu face struggle over Iran "red lines"

Barack Obama

(Reuters) - President Barack Obama and Israeli Prime Minister Benjamin Netanyahu are deeply at odds over how fast the clock is ticking toward possible military action against Iran's nuclear program, and their talks on Monday are unlikely to change that.

Even though Obama has offered assurances of stiffened U.S. resolve against Iran before the White House meeting, the two allies are still far apart on explicit nuclear "red lines" that Tehran must not be allowed to cross, and they have yet to agree on a time frame for when military action may be necessary.

Obama wants Israel to hold off on attacking Iran's nuclear sites, insisting there is still time for sanctions and diplomacy to work. But he also vowed in a speech on Sunday to the largest U.S. pro-Israel lobby that he would be ready to act militarily - with all "elements of American power" - to prevent the Islamic republic from building an atomic bomb.

Israeli leaders, who see Iran's nuclear advances as a looming existential threat and reserve the right to act alone in self-defense, have made clear they are operating on a far shorter, more urgent timeline.

Their most immediate concern is that Iran be prevented from reaching nuclear weapons capability, not just from developing an actual device, and they worry that time is running out for an effective Israeli attack as Tehran buries its nuclear facilities deeper underground.

While Obama and Netanyahu - who have had a strained relationship - will share intelligence information on Monday, a source close to the administration said there was little reason to believe they would make significant progress toward bridging key differences on a common threshold for military action.

"They'll be looking for mutual understandings and may find a few, but the biggest problem is they're working on different clocks," the source said.

GEOPOLITICAL DRAMA IN U.S. ELECTION YEAR

Obama's meeting with Netanyahu comes amid U.S. fears that Israel might opt to strike Iran on its own if it is not convinced of Washington's determination to do whatever is needed to rein in Tehran's nuclear ambitions. Iran remains defiant but says it wants nuclear technology strictly for peaceful purposes.

The geopolitical drama is being played out in the midst of a U.S. presidential campaign, with Republican presidential contenders accusing the Democratic president of being too tough on Israel and not tough enough with Iran.

Israel comes to Monday's talks with a firm belief that Iran has decided to seek to develop nuclear weaponry and is gathering the necessary components before attempting a "breakout."

Israeli officials maintain that once Iran moves forward, it could enrich uranium to weapons grade and have a rudimentary nuclear device within months, though constructing a deployable warhead would take longer, perhaps until mid-decade.

U.S. officials do not believe the situation is that close to the brink. They say that while Iran may be maneuvering to keep its options open there is no clear intelligence that the country has made a final decision to pursue a nuclear weapon.

Both sides agree that it is impossible to know the full extent of Iranian intentions. American spy agencies are wary about drawing any categorical conclusions after an embarrassing intelligence lapse that led to erroneous accusations of Iraqi nuclear arms work, which the Bush administration used to help justify the 2003 U.S.-led invasion that toppled Saddam Hussein.

Still, Obama - in an Atlantic magazine interview published on Friday - insisted that Iran "is not yet in a position to obtain a nuclear weapon without us having a pretty long lead time in which we will know that they are making that attempt."

And Obama warned in Washington on Sunday against "loose talk" of war with Iran, saying such "bluster" was counterproductive because it has been driving up global oil prices and boosting demand for Iran's oil exports.

That may have been a message to Netanyahu and other Israeli leaders, whose have engaged in a strident exchange of recriminations with Iranian officials in recent months.

Daniel Levy, an analyst at the New America Foundation think tank, said Obama had "offered clarity and commitments on mainstream Israeli concerns without capitulating to the Netanyahu narrative, which is far more dismissive of diplomacy."

Speaking in Ottawa, the right-wing Israeli leader ignored Obama's appeal to let sanctions run their course and focused on the president's insistence on keeping the military option open and backing Israel's right to defend itself.

It was unclear whether Obama's sharpened rhetoric against Iran and calls for restraint by Israel would be enough to delay any Israeli military plans against Tehran, which has called for the destruction of the Jewish state.

Israeli Defense Minister Ehud Barak has warned that Iran is approaching a "zone of immunity," when Tehran is able to shield its nuclear facilities from Israeli air strikes. The United States, however, would still likely have the firepower for a more sustained air assault to destroy the sites.

BEHIND CLOSED DOORS

Obama took a significant step forward in Israel's eyes when, in the Atlantic interview, he ruled out accepting, then acting to "contain," a nuclear-armed Iran.

While U.S. officials insist that Obama will not publicly lay down any new red lines for Iran during Netanyahu's visit, they do not rule out the possibility that the president might try to mollify some Israeli concerns in private.

"They're going to sit down and they're going to talk through the tactics involved," Obama re-election campaign strategist David Axelrod told the ABC "This Week" television program.

Still, U.S. officials doubt that Netanyahu will provide Obama with any guarantee that Israel will consult Washington - its biggest source of military assistance - before launching any strikes on Iran.

Even if Obama assures Netanyahu that the United States has the firepower to deliver a devastating blow to Iran's nuclear program further down the line, the Israelis have made clear they cannot rely on that commitment alone.

One line of thinking within the Obama administration is that keeping it in the dark about any Israeli military plans might be best for the United States since any sign of complicity would inflame anti-American sentiment in the Muslim world.

Dennis Ross, Obama's former Middle East adviser, suggested, however, that the "noise" from Israel over a possible strike was geared more toward pressuring the international community for tightened sanctions than foreshadowing an imminent attack.

"Now that it's an issue of the world against Iran, Israel likes it that way and would not be inclined to act precipitously," Ross said last week.

But others who know Netanyahu well say he is approaching the Iranian challenge with a sense of historic responsibility to ensure Israel's survival, what some have called the "Holocaust factor."

He has made clear that Israel, believed to be the Middle East's only nuclear weapons power, will do what it takes to prevent Iran from getting the bomb.

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Iran has expanded sensitive nuclear work: U.N. agency

Iran's President Mahmoud Ahmadinejad unveiling a nuclear projects

(Reuters) - Iran has sharply stepped up its controversial uranium enrichment drive, the U.N. nuclear agency said on Friday in a report that will further inflame Israeli fears the Islamic Republic is pushing ahead with atomic bomb plans.

The nuclear watchdog also gave details of its mission to Tehran this week where Iran failed to respond to allegations of research relevant to developing nuclear arms - a blow to the possible resumption of diplomatic talks that could help calm worries about a new war in the Middle East.

"The Agency continues to have serious concerns regarding possible military dimensions to Iran's nuclear program," the International Atomic Energy Agency said in a quarterly report about Iran issued to member states.

Iran's increase of work that can have both civilian and military purposes underlines that it has no intention of backing down in a long-running dispute with the West that has sparked fears of war.

U.S. crude futures extended a rally on the IAEA's findings, which added to concerns that Iran's tensions with the West would escalate. It gained more than $2 to hit the highest intraday price in nine months.

The White House said the IAEA report confirmed that Iran was violating U.N. Security Council resolutions with its nuclear enrichment program.

"When combined with its continued stonewalling of international inspectors, Iran's actions demonstrate why Iran has failed to convince the international community that its nuclear program is peaceful," White House National Security Council spokesman Tommy Vietor said in a statement.

In what would be a big expansion, Iran has increased the number of centrifuge machines enriching uranium - material that can be used to make atomic bombs if refined much further - by roughly a third since late last year, the report indicated.

Preparatory work to install thousands more centrifuges is under way, potentially shortening the time needed to make high-grade uranium for a nuclear weapons.

Tehran says its nuclear program is exclusively for civilian purposes, but its refusal to curb enrichment has drawn increasingly tough sanctions on its oil exports.

Iran's ambassador to the IAEA said the report had vindicated its position and insisted Tehran had no intention of giving up its nuclear march.

"The IAEA report indicated that all Iran's nuclear activities are under the supervision of the agency," the semi-official Fars news agency quoted Ali Asghar Soltanieh as saying.

"It shows again that Iran's nuclear activity is peaceful."

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Iran halts oil sales to UK, France on eve of talks

Iranian Oil minister Rostam Qasemi talks to journalist

(Reuters) - Iran ordered a halt to its oil sales to Britain and France on Sunday in a move seen as retaliation against tightening EU sanctions, as a team of U.N. inspectors flew to Tehran to press the Islamic Republic over its disputed nuclear program.

The European Union enraged Tehran last month when it decided to impose a boycott on its oil from July 1. Iran, the world's fifth-largest oil exporter, responded by threatening to close the Strait of Hormuz, the main Gulf oil shipping lane.

On Sunday, its oil ministry went a step further, announcing Iran has now stopped selling oil to France and Britain altogether - a powerful yet largely symbolic message since neither European nation relies on Iranian crude imports.

"Exporting crude to British and French companies has been stopped ... we will sell our oil to new customers," spokesman Alireza Nikzad was quoted as saying on the ministry website.

Iran, which denies Western allegations that it is seeking to make nuclear weapons, has ramped up its rhetoric in recent weeks while also expressing willingness to resume negotiations on its nuclear program.

A five-member team from the U.N. International Atomic Energy Agency (IAEA) flew to Tehran late on Sunday for talks, although Western diplomats have played down any hopes of a major breakthrough in the two-day meeting.

"I'm still pessimistic that Iran will demonstrate the substantive cooperation necessary," one envoy said in Vienna.

Yet the outcome of this week's discussions is important and will be watched closely because it could either intensify the standoff or offer scope to reduce tensions.

The European Commission says the bloc would not be short of oil if Iran stopped crude exports as it has enough stock to meet its needs for around 120 days.

Industry sources said European oil buyers were already making big cuts in purchases from Iran months in advance of EU sanctions. France's Total has stopped buying Iranian oil while debt-ridden Greece is most exposed to Iranian crude disruption among European countries.

MILITARY STRIKE?

Iran says its nuclear program is entirely peaceful but its refusal to curb uranium enrichment, which can have both military and civilian purposes, has raised concerns.

Western powers have not ruled out using force against Iran, and there has been an intense public discussion in Israel about whether it should attack Iran to stop it making a nuclear bomb.

However, on Sunday the top U.S. military officer said a military strike would be premature as it was not clear that Tehran would use its nuclear capabilities to build an atomic bomb.

"I believe it is unclear (that Iran would assemble a bomb) and on that basis, I think it would be premature to exclusively decide that the time for a military option was upon us," said General Martin Dempsey, chairman of the U.S. military's Joint Chiefs of Staff.

He said he believed the Iranian government was a "rational actor."

The West has expressed some optimism over the prospect of new talks with Tehran, particularly after it sent a letter to EU foreign policy chief Catherine Ashton last week promising to bring "new initiatives" to the table.

"In these negotiations, we are looking for a way out of Iran's current nuclear issue so that both sides win," Iranian TV quoted Foreign Minister Ali Akbar Salehi as saying on Sunday.

Oil is a major part of Iran's export revenues and an important lifeline for its increasingly isolated economy. It has little refining capacity and has to import about 40 percent of its gasoline needs for domestic consumption.

Tightening sanctions, combined with high inflation, have squeezed the ability of working-class Iranians to feed themselves and their families, and this uncertainty forms the backdrop to a parliamentary vote on March 2.

"Everything's become so expensive in the past few weeks," said Marjan Hamidi, an Iranian shopper in Tehran, "But my husband's income stays the same. How am I going to live like this?"

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Iranian company wants to send toy drone to Obama

Toy-Drone made by Iran

Tehran, Iran (CNN) -- An Iranian non-profit company says it will honor U.S. President Barack Obama's request that Iran return a drone that crashed there last year.

But instead of the actual drone, the company says it will send miniature toy versions. A lot of them.

"We plan to send a full squadron of 12 to the White House for President Obama as a present," said Reza Kioumarsi, a spokesman for the Aaye Art Group, a Tehran-based non-profit, non-governmental company that makes novelty items.

The company is trying to determine what Obama's favorite color is before sending the drones, which are 1/80th the size of the real drone, Kioumarsi said.

In December, Obama said the U.S. has asked Iran to return the highly classified RQ-170 Sentinel drone.

"We've asked for it back. We'll see how the Iranians respond," Obama said at the time.

This is probably not the response Obama was seeking.

Iran has said the country's armed forces had downed the drone near Kashmar, some 225 kilometers (140 miles) from the border with Afghanistan on December.

President Mahmoud Ahmadinejad gave a speech in December that seemed to suggest that Iran wouldn't return it.

"The North Americans at best have decided to give us this spy plane," Ahmadinejad said.

The RQ-170 Sentinel is one of the United States' most sophisticated drones and flies at up to 50,000 feet. It is designed to evade sophisticated air defenses.

One former intelligence official said it's "impossible to see" and discounted Iranian claims that it had been brought down by some form of electronic counter-measures. "It simply fell into their laps," he said -- after satellite communication was lost.

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Iran calls for Israel to be "punished"

(Reuters) - Major powers signaled on Friday their willingness to reopen talks about curbing Iran's suspected pursuit of nuclear weapons but said Tehran must show it is serious about any negotiations.

The focus on diplomacy follows weeks of rising tensions between the West, which is seeking to cut Iran's oil sales, and Tehran, which has threatened to close the Strait of Hormuz through which almost one-fifth of oil traded worldwide flows.

Alarmed Arab neighbors made a plea to avoid escalating the dispute over Iran's nuclear program while an ally of Iran's supreme leader called for Israel to be "punished" for allegedly killing an Iranian nuclear scientist.

The West suspects Iran is using its civilian nuclear program as a cover to develop atomic weapons and has pursued a two-track approach of sanctions and diplomacy to try to rein it in. Iran says its nuclear program is solely to produce electricity.

While major powers stressed their openness to renewed talks,

diplomats said they remain divided on their approach, notably on whether to let Iran keep enriching uranium at some level.

The group, known as the P5+1 and as the EU3+3, includes Britain, China, France, Germany, Russia and the United States.

EU foreign policy chief Catherine Ashton, who represents the group, issued a statement making clear that a diplomatic path remains open to Iran despite tougher sanctions and fresh speculation of a military strike on its nuclear facilities.

"The EU3+3 has always been clear about the validity of the dual track approach," Ashton's spokesperson said in a statement that included her October 21 letter to the Iranians laying out the possibility of talks. "We are waiting for the Iranian reaction."

The release of the statement and letter appeared to reflect frustration at Iran's statements hinting at a willingness to resume talks but Tehran's failure to formally respond to the letter and commit to discussing the nuclear program in earnest.

CONCILIATORY TONE FROM CLINTON

U.S. Secretary of State Hillary Clinton struck a decidedly conciliatory tone at a news conference with German Foreign Minister Guido Westerwelle in Washington.

"We do not seek conflict. We strongly believe the people of Iran deserve a better future," she said. "They can have that future, the country can be reintegrated into the global community ... when their government definitively turns away from pursuing nuclear weapons.

"We have to see a seriousness and sincerity of purpose coming from them."

Westerwelle said, "One thing is clear: the door for serious dialogue remains open but the option of nuclear weapons in Iran is not acceptable."

Diplomats said major powers are divided over what incentives to offer Iran if talks were to resume.

A central issue is whether the group might ask Iran to cease enriching uranium to the higher level of 20 percent but allow it, at least for a time, to continue enriching at lower levels -

a stance partly at odds with the group's past positions.

Uranium enrichment is a process that at low levels can yield fuel for nuclear power plants or, if carried out to much higher levels of purity, can generate fissile material for bombs.

To let Iran enrich at lower levels would be something of a concession by the P5+1, although it has previously offered a temporary "freeze-for-freeze" in which Iran would not expand its nuclear program and the powers would not pursue more sanctions.


IRANIAN CALLS FOR PUNISHING ISRAEL

After Supreme Leader Ayatollah Ali Khamenei paid his respects to the families of two scientists assassinated on what Tehran believes were Israel's orders, one of them just last week, a close ally demanded retribution.

"Terrorism has a long history in some countries like the Zionist regime," Ali Larijani, speaker of Iran's parliament and a former nuclear negotiator, said Israel, which views an atomic bomb in Iran's hands as a threat to its survival.

"The Zionist regime should be punished in a way that it can not play such games with our country again."

Such threats have been made before in Tehran and it is unclear how or when they might be carried out. Israel, widely assumed to have the only nuclear arsenal in the Middle East, is on guard against attacks on its borders and within, notably by Lebanon's Hezbollah movement, which is supported by Iran.

Obama's top military official, chairman of the Joint Chiefs of Staff General Martin Dempsey, briefly visited Israel and was quoted by its Defense Ministry as telling officials there that Washington was keen to coordinate on strategy.

"We have many interests in common in the region in this very dynamic time and the more we can continue to engage each other, the better off we'll all be," Dempsey was quoted as saying in a statement issued by the Israeli Defense Ministry.

The comments may reflect U.S. concerns about the possibility that Israel, which has previously bombed nuclear facilities in Iraq and in Syria, might launch an attack on Iran.

French President Nicolas Sarkozy said on Friday that time was running out to avoid a military intervention and appealed to China and Russia, veto-wielding U.N. powers who have been reluctant to tighten sanctions, to support new sanctions.

"Time is running out. France will do everything to avoid a military intervention," Sarkozy told ambassadors gathered in Paris. "A military intervention will not solve the problem, but it will unleash war and chaos in the Middle East."

"We need stronger, more decisive sanctions that stop the purchase of Iranian oil and freezes the assets of the central bank, and those who don't want that will be responsible for the risks of a military conflict," Sarkozy warned.

"We really need you," he said in an appeal to Moscow and Beijing.

With tensions, including mutual threats of disrupting the oil trade, creating worries across the region, the foreign minister of the United Arab Emirates, the wealthy, U.S.-allied state sitting across the Gulf from Iran, offered a warm welcome to a call for calm on Thursday by his Iranian counterpart.

"It's important to get far away from any escalation and we stress the stability of the region," Sheikh Abdullah bin Zayed al-Nahayan was quoted as saying by state news agency WAM.

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Iran blast kills nuclear scientist

Bomb kills Iran nuclear scientist

(Reuters) - An Iranian nuclear scientist was blown up in his car by a motorbike hitman, prompting Tehran to blame Israeli and U.S. agents but insist the killing would not derail a nuclear program that has raised fears of war and threatened world oil supplies.

The fifth daylight attack on technical experts in two years, the magnetic bomb delivered a targeted blast to the door of 32-year-old Mostafa Ahmadi-Roshan's car during Wednesday's morning rush-hour. The chemical engineer's driver also died, Iranian media said, and a passer-by was slightly hurt.

Israel, whose military chief said on Tuesday that Iran could expect to suffer more mysterious mishaps, declined comment. The White House, struggling for Chinese and Russian help on economic sanctions, denied any U.S. role and condemned the attack.

While Israeli or Western involvement seemed eminently plausible to independent analysts, a role for local Iranian factions or other regional interests engaged in a deadly shadow war of bluff and sabotage could not be ruled out.

The killing, which left debris hanging in trees and body parts on the road, came in a week of heightened tension:

Iran has started an underground uranium enrichment plant and sentenced an American to death for spying; Washington and Europe have stepped up efforts to cripple Iran's oil exports for its refusal to halt work that the West says betrays an ambition to build nuclear weapons. Iran says its aims are entirely peaceful.

Tehran has threatened to choke the West's supply of Gulf oil if its exports are hit by sanctions, drawing a U.S. warning that its navy was ready to open fire to prevent any blockade of the strategic Strait of Hormuz, through which 35 percent of the world's seaborne traded oil passes.

Secretary of State Hillary Clinton said Iran's threats to close the strait were "provocative and dangerous" and repeated the White House denial of any U.S. involvement in the killing of Ahmadi-Roshan.

In Tokyo on Thursday, Japanese Finance Minister Jun Azumi pledged after talks with U.S. Treasury Secretary Timothy Geithner to steadily reduce oil imports from Iran in support of U.S. sanctions on Tehran over its nuclear program.

Geithner welcomed Tokyo's cooperation, which could be an encouraging sign for U.S. policy after China, a big buyer of Iranian crude, and Russia rebuffed U.S. appeals to starve Iran of much-needed revenue from oil sales.

On a visit to Cuba on Wednesday, Iranian President Mahmoud Ahmadinejad said nothing about the bomb attack but flashed the victory sign and said Iran had done nothing to warrant enmity from its enemies.

"Have we assaulted someone? Have we wanted more than we should have? Never, never. We have only asked to speak about and establish justice," said Ahmadinejad.

Analysts saw the latest assassination, which would have taken no little expertise, as less a reaction to recent events than part of a longer-running, covert effort to thwart Iran's nuclear development program that has also included suspected computer viruses and mystery explosions.

While fears of war have forced up oil prices, the region has seen periods of saber-rattling and limited bloodshed before without reaching all-out conflict. But a willingness in Israel, which sees an imminent Iranian atom bomb as a threat to its existence, to attack Iranian nuclear sites, with or without U.S. backing, has heightened the sense that a crisis is coming.

"HEINOUS ACT"

The Atomic Energy Organization of Iran, which has failed to persuade the West that its quest for nuclear power has no hidden military goal, said the killing of Ahmadi-Roshan would not deter it: "We will continue our path without any doubt ... Our path is irreversible," it said in a statement carried on television.

"The heinous acts of America and the criminal Zionist regime will not disrupt our glorious path ... The more you kill us, the more our nation will awake."

First Vice-President Mohammad Reza Rahimi, quoted by IRNA news agency, said: "Iran's enemies should know they cannot prevent Iran's progress by carrying out such terrorist acts."

Iran's leaders, preparing for the first national election since a disputed presidential vote in 2009 brought street protests against 32 years of clerical rule, are struggling to contain internal tensions. Defiance of Israel and Western powers plays well with many who will vote in March.

In Washington, White House spokesman Tommy Vietor said: "The United States had absolutely nothing to do with this ... We strongly condemn all acts of violence, including acts of violence like what is being reported today."

Israel, which has a history of covert killings abroad, declined comment, though army spokesman Yoav Mordechai wrote on Facebook: "I don't know who settled the score with the Iranian scientist, but I am definitely not shedding any tears."

MOTORCYCLE HITMAN

The attack bore some of the hallmarks of sophisticated intelligence agencies capable of circumventing Iran's own extensive security apparatus and apparently taking care to limit the harm to passers-by.

While witnesses spoke of a frighteningly loud explosion and parts of the Peugeot 405 ended up in the branches of the trees lining Gol Nabi Street, much of the car was left intact. This suggested a charge designed to be sure of both killing the occupants and preventing serious injury to others.

Witnesses said the motorcycle, from which the rear pillion passenger reached out to stick the device to the side of the car, made off into the heavy commuter traffic.

Though the scientist killed -- the fourth in five such attacks since January 2010 -- was only 32, Iranian media described him as having a role overseeing uranium enrichment at Natanz underground site. The semi-official news agency Mehr said Ahmadi-Roshan had recently met officials of the U.N. nuclear watchdog, the International Atomic Energy Agency.

At the IAEA in Vienna, where a spokeswoman condemned the killing, officials could not confirm knowing of him.

Analysts say that killing scientists -- especially those whose lack of personal protection suggests a relatively junior role -- is unlikely to have much direct impact on Iran's nuclear program, which Western governments allege is seeking to enrich enough uranium highly enough to let it build weapons.

COVERT WAR

Sabotage -- like mysterious reported explosions at military facilities or the Stuxnet computer virus widely suspected to have been deployed by Israel and the United States to disrupt nuclear facilities in 2010 -- may have had more direct effects.

However, assassinations may be intended to discourage Iranians with nuclear expertise from working on the program.

Bruno Tertrais from France's Strategic Research Foundation said: "It certainly has a psychological effect on scientists working on the nuclear program."

He cautioned, however, against assuming that Israel, the United States or both were behind the latest attack.

Trita Parsi, a U.S.-based expert on Iran, said the killing might, along with the heightened rhetoric of recent weeks, be part of a pattern ahead of a possible resumption of negotiations on Iran's nuclear program; some parties may want to improve their bargaining position, others may see violence as a way of thwarting renewed negotiations altogether, Parsi said.

Last month, Iran signaled a willingness to return to a negotiating process which stalled a year ago, though Western officials say a new round of talks is far from certain yet.

SANCTIONS CAMPAIGN

Iran's decision to carry out enrichment work deep underground in the once undeclared plant at Fordow, near the holy Shi'ite city of Qom, could make it harder for U.S. or Israeli forces to carry out veiled threats to use force against Iranian nuclear facilities. The move to Fordow could reduce the time available for diplomacy to avert any attack.

The announcement on Monday that enrichment -- a necessary step to make uranium into nuclear weapons -- had begun at Fordow has given added impetus to Western efforts to impose an oil export embargo intended to pressure Tehran to halt enrichment.

Iran, a signatory to the treaty banning the spread of nuclear weapons, says it is entitled to conduct peaceful research and denies any military nuclear aims. Its adversaries say its failure to take up their offers of help with civilian technology undermine the credibility of its position.

Oil prices have firmed 5 percent since U.S. President Barack Obama moved on New Year's Eve to block bank payments for oil to Iran. The European Union is expected this month to impose a ban on its states buying oil from Tehran, and other major customers have been looking for alternative supplies.

In Iran, the new U.S. sanctions have started to bite.

The rial currency has lost 20 percent of its value against the dollar in the past week and Iran has threatened to shut the Strait of Hormuz.

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Iran Sentences American, 28, to Death

Amir Mirzaei Hekmati

TEHRAN, Iran — An Iranian court has convicted an American man of working for the CIA and sentenced him to death, state radio reported Monday, in a case adding to the accelerating tension between the United States and Iran.

Iran charges that as a former U.S. Marine, Amir Mirzaei Hekmati, received special training and served at U.S. military bases in Iraq and Afghanistan before heading to Iran for his alleged intelligence mission. The radio report did not say when the verdict was issued.

The 28-year-old former military translator was born in Arizona and graduated from high school in Michigan. His family is of Iranian origin. His father, a professor at a community college in Flint, Michigan, has said his son is not a CIA spy and was visiting his grandmothers in Iran when he was arrested.

Behnaz Hekmati, his mother, said in an email to The Associated Press that she and her husband, Ali, are "shocked and terrified" that their son has been sentenced to death. She said the verdict is "the result of a process that was neither transparent nor fair."

Under Iranian law, he has 20 days to appeal. Hekmati has a court-appointed lawyer who was identified only by his surname, Samadi, and there was no word about an appeal.

Gholam Hossein Mohseni Ejehei, spokesman for Iran's judiciary said if the verdict is appealed, it would go to Iran's Supreme Court, the official IRNA news agency reported.

Hekmati's trial took place as the U.S. announced new, tougher sanctions against Iran over its nuclear program, which Washington believes Tehran is using to develop a possible atomic weapons capability.

Iran, which says it only seeks nuclear reactors for energy and research, has sharply increased its threats and military posturing against stronger pressures, including the U.S. sanctions targeting Iran's Central Bank in attempts to complicate its ability to sell oil.

The U.S. State Department has demanded Hekmati's release.

The court convicted him of working with a hostile country, belonging to the CIA and trying to accuse Iran of involvement in terrorism, Monday's report said.

In its ruling, a branch of Tehran Revolutionary Court described Hekmati as a mohareb, an Islamic term that means a fighter against God, and a mofsed, or one who spreads corruption on earth. Both terms appear frequently in Iranian court rulings.

In a closed court hearing in late December, the prosecution asked for the death penalty for Hekmati.

The U.S. government has called on Iranian authorities to grant Swiss diplomats access to him in prison. The Swiss government represents U.S. interests in Iran because the two countries don't have diplomatic relations.

Hekmati is a dual U.S.-Iranian national. Iran considers him an Iranian since the country's law does not recognize dual citizenship.

Similar cases against Americans accused of spying have heightened tensions throughout the years-long standoff over Iran's nuclear program.

Iran arrested three Americans in July 2009 along the border with Iraq and accused them of espionage, though the Americans said they were just hiking in the scenic and relatively peaceful Kurdish region of northern Iraq.

One of them was released after a year in prison, and the other two were freed in September in deals involving bail payments that were brokered by the Gulf sultanate of Oman, which has good relations with Iran and the U.S.

On Dec. 18, Iran's state TV broadcast video of Hekmati delivering a purported confession in which he said he was part of a plot to infiltrate Iran's Intelligence Ministry.

In a statement released the same day, the Intelligence Ministry said its agents identified Hekmati before his arrival in Iran, at Bagram Air Field in neighboring Afghanistan. Bagram is the main base for American and other international forces outside Kabul, the Afghan capital.

It is not clear exactly when he was arrested. News reports have said he was detained in late August or early September.

Hekmati's father said in a December interview with The Associated Press, that his son was a former Arabic translator in the U.S. Marines who entered Iran about four months earlier to visit his grandmothers.

At the time, he was working in Qatar as a contractor for a company "that served the Marines," his father said, without providing more specific details.

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Iran threatens U.S. Navy as sanctions hit economy

Iranian Submarine

(Reuters) - Iran threatened Tuesday to take action if the U.S. Navy moves an aircraft carrier into the Gulf, Tehran's most aggressive statement yet after weeks of saber-rattling as new U.S. and EU financial sanctions take a toll on its economy.

The prospect of sanctions targeting the oil sector in a serious way for the first time has hit Iran's rial currency, which reached a record low Tuesday and has fallen by 40 percent against the dollar in the past month.

Queues formed at banks and some currency exchange offices shut their doors as Iranians scrambled to buy dollars to protect their savings from the currency's fall.

Army chief Ataollah Salehi said the United States had moved an aircraft carrier out of the Gulf because of Iran's naval exercises, and Iran would take action if the ship returned.

"Iran will not repeat its warning ... the enemy's carrier has been moved to the Sea of Oman because of our drill. I recommend and emphasize to the American carrier not to return to the Persian Gulf," army chief Salehi said.

"I advise, recommend and warn them over the return of this carrier to the Persian Gulf because we are not in the habit of warning more than once."

The aircraft carrier USS John C Stennis leads a U.S. Navy task force in the region. It is now in the Arabian Sea providing air support for the war in Afghanistan, said Lieutenant Rebecca Rebarich, spokeswoman for the U.S. 5th Fleet.

The carrier left the Gulf on December 27 on a "preplanned, routine transit" through the Straight of Hormuz, she said.

Forty percent of the world's traded oil flows through that narrow straight - which Iran threatened last month to shut if sanctions halted its oil exports.

Brent crude futures were up more than $4 Tuesday afternoon in London, pushing above $111 a barrel on the news of potential threats to supply in the Gulf, as well as strong Chinese economic data.

Tehran's latest threat comes at a time when sanctions are having an unprecedented impact on its economy, and the country faces political uncertainty with an election in March, its first since a 2009 vote that triggered countrywide demonstrations.

The West has imposed the increasingly tight sanctions over Iran's nuclear program, which Tehran says is strictly peaceful but Western countries believe aims to build an atomic bomb. After years of measures that had little impact, the new sanctions are the first that could have a serious effect on Iran's oil trade, 60 percent of its economy.

Sanctions signed into law by U.S. President Barack Obama on New Year's Eve would cut off financial institutions that work with Iran's central bank from the U.S. financial system, blocking the main path for payments for Iranian oil.

The EU is expected to impose new sanctions by the end of this month, possibly including a ban on oil imports and a freeze of central bank assets.

Even Iran's top trading partner China - which has refused to back new global sanctions against Iran - is demanding discounts to buy Iranian oil as Tehran's options narrow. Beijing has cut its imports of Iranian crude by more than half for January, paying premiums for oil from Russia and Vietnam to replace it.

THREATS

Iran has responded to the tighter measures with belligerent rhetoric, spooking oil markets briefly when it announced last month it could prevent shipping through the Straight of Hormuz.

It then held 10 days of naval exercises in the Gulf, test firing missiles that could hit U.S. bases in the Middle East. Tuesday's apparent threat to take action against the U.S. military for sailing in international waters takes the aggressive rhetoric to a new level.

Experts still say they do not expect Tehran to charge headlong into an act of war - the U.S. Navy is overwhelmingly more powerful than Iran's sea forces - but Iran is running out of diplomatic wiggle room to avert a confrontation.

"I think we should be very worried because the diplomacy that should accompany this rise in tension seems to be lacking on both sides," said Richard Dalton, former British ambassador to Iran and now an associate fellow at Chatham House think tank.

"I don't believe either side wants a war to start. I think the Iranians will be aware that if they block the Strait or attack a U.S. ship, they will be the losers. Nor do I think that the U.S. wants to use its military might other than as a means of pressure. However, in a state of heightened emotion on both sides, we are in a dangerous situation."

Henry Wilkinson at Janusian Risk Advisory consultants said the threats might be a bid by Iran to remind countries contemplating sanctions of the cost of havoc on oil markets.

"Such threats can cause market confidence in the global oil supply to wobble and can push up oil prices and shipping insurance prices. For the EU powers debating new sanctions, this could be quite a pinch in the current economic climate."

The new U.S. sanctions law, if implemented fully, would make it impossible for many refineries to pay Iran for crude. It takes effect gradually and lets Obama grant waivers to prevent an oil price shock, so its precise impact is hard to gauge.

The European Union is expected to consider new measures by the end of this month. A blockade would halt purchase of Iranian oil by EU members such as such as crisis-hit Greece, which has taken advantage of the discounted price of Iranian crude.

French Foreign Minister Alain Juppe said Paris wants new measures taken by January 30, when EU foreign ministers meet. President Nicolas Sarkozy has proposed freezing Iranian central bank assets and an oil embargo, Juppe said.

A German foreign ministry spokesman said Berlin was in discussions with other EU states on "qualitatively new sanctions against Iran" to "ensure the sources of funding for the Iranian nuclear program dry up."

Michael Mann, spokesman for EU foreign policy chief Catherine Ashton, said member states would discuss the issue this week in the hope of reaching an agreement on new steps before the January 30 meeting.

"The ball is still in the Iranians' court," he said.

Iran has written to Ashton asking to restart talks over its nuclear program that collapsed a year ago. The EU says it does not want talks unless Iran is prepared to discuss serious steps, such as halting its enrichment of uranium.

CHINA CUTS IRAN OIL IMPORTS

Although China, India and other countries are unlikely to sign up to any oil embargo, tighter Western sanctions mean such customers will be able to insist on deeper discounts for Iranian oil, reducing Tehran's income.

Beijing has already been driving a hard bargain. China, which bought 11 percent of its oil from Iran during the first 11 months of last year, has cut its January purchase by about 285,000 barrels per day, more than half of the close to 550,000 bpd that it bought through a 2011 contract.

The impact of falling government income from oil sales can be felt on the streets in Iran in soaring prices for state subsidized goods and a falling rial currency.

Some currency exchange offices in Tehran, when contacted by Reuters, said there was no trading until further notice.

"The rate is changing every second ... We are not taking in any rials to change to dollars or any other foreign currency," said Hamid Bakshi in central Tehran.

Housewife Zohreh Ghobadi, in a long line at a bank, said she was trying to withdraw her savings and change it into dollars.

Iranian authorities played down any link between the souring exchange rate and the imposition of the new sanctions.

"The new American sanctions have not materialized yet," Foreign Ministry spokesman Ramin Mehmanparast said.

The economic impact is being felt ahead of a nationwide parliamentary election on March 2, the first vote since a disputed 2009 presidential election that brought tens of thousands of Iranian demonstrators into the streets.

Iran's rulers put those protests down by force, but since then the "Arab Spring" revolts have show that authoritarian governments in the region are vulnerable to street unrest.

In a sign of political tension among Iran's elite ahead of the vote, a court jailed the daughter of powerful former President Akbar Hashemi Rafsanjani Tuesday and banned her from politics for "anti-state propaganda."

Rafsanjani sided with reformists during the demonstrations following the 2009 vote. Daughter Faezeh Hashemi Rafsanjani went on trial last month on charges of "campaigning against the Islamic establishment," news agency ISNA said.

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Iranian president targeted by shoe thrower

Iranian President

Tehran, Iran (CNN) -- A 45-year-old textile worker who has been out of work for a year threw his shoes Monday at Iranian President Mahmoud Ahmadinejad to protest not having received unemployment benefits, an Iranian website reported.

He missed, striking a banner behind the president instead, said Ghased News, an unofficial website. CNN has not been able to confirm the report independently.

Ghased News said the incident occurred in the northern city of Sari during a memorial ceremony for a former oil minister who died last year.

Attendees beat the man until security forces intervened, the site reported. The man had been fired from his job at a weaving factory and said he had not received unemployment benefits for a year, it said.

Ghased News identified the man as Rashid S., a resident of Sari who was once jailed for throwing eggs and tomatoes at former President Mohammad Khatami.

The audience apologized to Ahmadinejad and chanted slogans in his support, Ghased News said.

Ahmadinejad's website, www.president.ir, posted a picture of the president at the event but made no mention of the flying footwear.

Throwing shoes is a sign of profound disrespect in Arab countries, but not in Iran. In December 2008, an Iraqi journalist threw his shoes at President George W. Bush during a news conference in Baghdad. He, too, missed. As he was pushed to the floor, the reporter shouted that his act was a "farewell kiss" to the "dog" who launched the 2003 invasion of Iraq.

The reporter, Muntadhar al-Zaidi, was released after nine months in jail.

Though many Iraqis hold Bush in low esteem, opinions were mixed in Iraq following the incident. Some viewed al-Zaidi as a hero, with thousands taking to the streets calling for his release; others said his act went against Arab traditions of honoring guests.

According to the CIA World Factbook, citing official government figures, Iran's unemployment rate last year was 13.2%. But many Iranians believe the true figure to be much higher.

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U.S. wants drone back from Iran, Obama says

Barack Obama, US President

President Barack Obama said Monday that the United States has asked Iran to return a U.S. drone aircraft that Iran claims it recently brought down in Iranian territory.

"We've asked for it back. We'll see how the Iranians respond," Obama said in a news conference.

The president's comments come one day after it was reported that an Iranian official said the country would not return the drone.

"No nation welcomes other countries' spy drones in its territory, and no one sends back the spying equipment and its information back to the country of origin," said Gen. Hossein Salami, deputy commander of the Armed Forces, according to the semi-official Fars news agency.

"It makes no difference where this drone originated and which group or country sent it to invade our air space," Salami said. "This was an act of invasion and belligerence."

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Iran releases video of downed U.S. spy drone–looking intact

Downed U.S. spy plane

Iran's Press TV on Thursday broadcast an extended video tour of the U.S. spy drone that went down in the country--and it indeed appeared to look mostly intact.

American officials have acknowledged that an unmanned U.S. reconnaissance plane was lost on a mission late last week, but have insisted that there is no evidence the drone was downed by hostile acts by Iran. Rather, they said, the drone likely went down because of a malfunction, and they implied the advanced stealth reconnaissance plane would likely have fallen from such a high altitude--the RQ-170 Sentinel can fly as high as 50,000 feet--that it wouldn't be in good shape.

But Iranian military officials have claimed since Sunday that they brought down an American spy drone that was little damaged. And now they have provided the first visual images of what looks to be a drone that at least outwardly appears to be in decent condition, in what is surely another humiliating poke in the eye for U.S. national security agencies.

The Pentagon declined to comment on the released images Thursday, a Defense Department spokesman told Yahoo News. But military analysts said it appeared to them to be the American drone in question.

"I have been doing this for thirty years, and it sure looks like" a stealthy U.S. drone to me," Loren Thompson, a military analyst with the Lexington Institute and consultant to the RQ-170's manufacturer, Lockheed Martin, told Yahoo News in a telephone interview Thursday. "I think we are going to face the high likelihood that Iran has an intact version of one of our most important intelligence gathering tools."

Still, Thompson went on, the intelligence "windfall" to Iran from obtaining the advanced U.S. stealthy drone may be mitigated.

"I don't think the Iranians get as much out of it as they might hope," he said. "It probably came into their hands as a result of a technical malfunction. What that means is they still don't have a real defense against the U.S. flying other vehicles that have similar capabilities, without much fear of interception."

Analysts also noted that the video of the drone released by Iran did not show the drone's underside. "Pretty intact," the Center for Strategic and International Studies' James Lewis said by email. "Interesting that they covered the underside."

The New York Times reported Thursday that--unsurprisingly--the RQ-170 was lost while making the latest foray over Iran during an extended CIA surveillance effort of Iran's nuclear and ballistic weapons program.

"The overflights by the bat-winged RQ-170 Sentinel, built by Lockheed Martin and first glimpsed on an airfield in Kandahar, Afghanistan, in 2009, are part of an increasingly aggressive intelligence collection program aimed at Iran, current and former officials say," the Times' Scott Shane and David Sanger wrote. "The urgency of the effort has been underscored by a recent public debate in Israel about whether time is running out for a military strike to slow Iran's progress toward a nuclear weapon."

Iran in turn has complained that the drone overflights represent an act of aggression and violation of its sovereignty, and summoned the Swiss envoy--who represents U.S. interests in Iran--on Thursday to lodge a protest.

However, while the images of the U.S. drone surely allowed Iran to score another public relations blow against Washington, Iran may find it tough to generate much in the way of international sympathy for being the target of U.S. surveillance.

Last week, Iranian hardliners ransacked the British embassy in Tehran, prompting the United Kingdom to recall its diplomatic staff from Tehran and order Iran's embassy in London closed. Last month, the UN atomic watchdog agency issued a report raising concerns about research Iran is suspected by some nations to have conducted before 2003 on military aspects of its nuclear program. Iran has insisted its nuclear program is for peaceful energy purposes. In October, the United States accused elements of Iran's Qods force of plotting to assassinate the Saudi envoy to the United States. The United Nations General Assembly voted last month in favor of a resolution condemning the Iranian plot.

Amid its growing international isolation, Iran, unsurprisingly, seemed intent to play up the drone incident for all it could.

"China, Russia want to inspect downed U.S. drone," proclaimed a headline from Iran's Mehr news agency Thursday.

The RQ-170 Sentinel, however, reportedly did not use the latest U.S. surveillance technology on board, in part because as a single-engine aircraft, it was thought more likely to occasionally go down.

"The basic principles of stealthy aircraft are fairly well known," Thompson said. "In terms of [the drone's] on-board electronics and information systems, it is fairly routine in combat to require authentication codes to make them hard to unlock."

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Iran claims to have brought down U.S. spy drone

UAV

U.S.-led forces say UAV went missing in western Afghanistan

The United States on Sunday appeared to give credence to Iranian state media reports that Iran had come into possession of a downed U.S. surveillance drone.

The American-led International Security Assistance Forces (ISAF) in Afghanistan issued a brief statement Sunday saying that an unarmed U.S. reconnaissance aircraft had gone missing while on a mission in western Afghanistan late last week.

"The UAV [unmanned aerial vehicle] to which the Iranians are referring may be a U.S. unarmed reconnaissance aircraft that had been flying a mission over western Afghanistan last week," the ISAF public affairs office said in the statement sent to Yahoo News and other media outlets Sunday, in response to queries on the Iranian reports. "The operators of the UAV lost control of the aircraft and had been working to determine its status."

The semi-official Islamic Republic News Agency (IRNA) reported Sunday that Iran's armed forces had brought down a U.S. spy drone in the east of the country.

Citing an "informed military official" the IRNA report "noted that the unmanned craft is of the type 'RQ170,' which was slightly damaged [and] is currently in the hands of the Iranian forces."

While the IRNA headline described the U.S. spy drone as having been "shot down," an Iranian military official quoted on Iranian state television claimed that an Iranian military cyber-warfare unit "managed to take over controls of the drone and bring it down," the Washington Post's Thomas Erdbrink noted. That latter account would seem to be more in line with the description given by ISAF of the spy drone operators having "lost control" of it in western Afghanistan last week.

American officials disputed that the drone had been shot down. One unidentified U.S. official told the Wall Street Journal the drone may have been suffering mechanical difficulties.

However, there have been previous reported incidents that have highlighted vulnerabilities in the security of U.S. drone information systems.

The United States Air Force acknowledged in October that a computer virus had infected the computer system at Creech Air Force base in Nevada that is used to remotely operate Predator and Reaper drones. In 2009, an Iraqi insurgent hacked into a U.S. drone down-link, which is not usually encrypted, cyber security expert James Lewis, a former Reagan administration official with the Center for Strategic and Institutional Studies, told Yahoo News last month.

"Militants in Iraq have used $26 off-the-shelf software to intercept live video feeds from U.S. Predator drones, potentially providing them with information they need to evade or monitor U.S. military operations," the Wall Street Journal's Siobhan Gorman, Yochi Dreazen and August Cole reported in December 2009.

"Senior defense and intelligence officials said Iranian-backed insurgents intercepted the video feeds by taking advantage of an unprotected communications link in some of the remotely flown planes' systems," the Journal report said. "Shiite fighters in Iraq used software programs such as SkyGrabber -- available for as little as $25.95 on the Internet -- to regularly capture drone video feeds, according to a person familiar with reports on the matter."

The unarmed stealth drone Iran claims to have brought down, the RQ-170 Sentinel, is manufactured by Lockheed Martin's Advanced Development Program, based in Palmdale, California.

Until 2009, the U.S. Air Force would say little about the model, despite reported sightings of it on the tarmac at Kandahar International Airport, Afghanistan since 2007.  A December 2009 photo of the RQ-170 posted on aviation websites, however, prompted the Air Force to at least acknowledge the plane's existence, Military Times' Michael Hoffman reported in 2009:

"For two years, the RQ-170 has been the Air Force's Bigfoot," Hoffman wrote. "Photos and drawings of the stealthy UAV, also called the 'Beast of Kandahar,' have surfaced, producing shrugs and no-comments from service officials. In early December, a clear photograph of the jet's left side appeared on aviation Web sites, perhaps prompting the Air Force to 'fess up."

However, Air Force officials have not explained what the stealth aircraft is doing in Afghanistan given the fact that the Taliban has no air force or radar, Hoffman noted.

"Experts such as Phil Finnegan, a UAV analyst at the Teal Group, an aerospace consulting firm, suggest the stealth capabilities are being used to fly in nearby countries," Hoffman wrote. "Neighboring Iran has an air force and air defense system that would require stealth technology to penetrate."

The RQ-170 was also reportedly used in U.S. surveillance surrounding the U.S. raid that killed Osama bin Laden in Abbottabad, Pakistan last May.

The RQ-170 reportedly does not use the most sophisticated U.S. military technology because as a single engine UAV, it was judged to have a higher likelihood of occasionally going down.

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Iranian protesters storm British diplomatic compounds

Protesters in Tehran, Iran

(Reuters) - Iranian protesters stormed two British diplomatic compounds in Tehran on Tuesday, smashing windows, torching a car and burning the British flag in protest against new sanctions imposed by London.

Britain said it was outraged and warned of "serious consequences." The U.N. Security Council condemned the attacks "in the strongest terms." U.S. President Barack Obama said he was disturbed by the incident and called on Iran to hold those responsible to account.

The attacks come at a time of rising diplomatic tension between Iran and Western nations who last week imposed fresh sanctions over Tehran's nuclear program, which they believe is aimed at achieving the capability of making an atomic bomb.

Iran, the world's fifth biggest oil exporter, says it only wants nuclear plants to generate electricity.

The embassy storming is also a sign of deepening political infighting within Iran's ruling hardline elites, with the conservative-led parliament attempting to force the hand of President Mahmoud Ahmadinejad and expel the British ambassador.

"Radicals in Iran and in the West are always in favor of crisis ... Such radical hardliners in Iran will use the crisis to unite people and also to blame the crisis for the fading economy," said political analyst Hasan Sedghi.

Several dozen protesters broke away from a crowd of a few hundred outside the main British embassy compound in downtown Tehran, scaled the gates, broke the locks and went inside.

Protesters pulled down the British flag, burned it, and put up the Iranian flag, Iranian news agencies and news pictures showed. Inside, the demonstrators smashed windows of office and residential quarters and set a car ablaze, news pictures showed.

One took a framed picture of Queen Elizabeth, state TV showed. Others carried the royal crest out through the embassy gate as police stood by, pictures carried by the semi-official Fars news agency showed.

All embassy personnel were accounted for, a British diplomat told Reuters in Washington, saying Britain did not believe that any sensitive materials had been seized.

Demonstrators waved flags symbolizing martyrdom and held aloft portraits of Supreme Leader Ayatollah Ali Khamenei who has the final say on matters of state in Iran.

Another group of protesters broke into a second British compound at Qolhak in north Tehran, the IRNA state news agency said. Once the embassy's summer quarters, the sprawling, tree-lined compound is now used to house diplomatic staff.

An Iranian report said six British embassy staff had been briefly held by the protesters. British Foreign Secretary William Hague said the situation had been "confusing" and that he would not have called them "hostages."

"Police freed the six people working for the British embassy in Qolhak garden," Iran's Fars news agency said.

A German school next to the Qolhak compound was also damaged, the German government said.

BRITAIN OUTRAGED

Police appeared to have cleared the demonstrators in front of the main downtown embassy compound, but later clashed with protesters and fired tear gas to try to disperse them, Fars said. Protesters nevertheless entered the compound a second time, before once again leaving, it said.

British Prime Minister David Cameron chaired a meeting of the government crisis committee to discuss the attacks which he said were "outrageous and indefensible."

"The failure of the Iranian government to defend British staff and property was a disgrace," he said in a statement.

"The Iranian government must recognize that there will be serious consequences for failing to protect our staff. We will consider what these measures should be in the coming days."

The United States, alongside the European Union and many of its member states also strongly condemned the attacks.

There have been regular protests outside the British embassy over the years since the 1979 Islamic revolution that toppled the U.S.-backed shah, but never have any been so violent.

The attacks and hostage-taking were a reminder of the 1979 takeover of the U.S. embassy in Tehran carried out by radical students who held 52 Americans hostage for 444 days. The United States cut diplomatic ties with Iran after the hostage-taking.

All British embassy personnel were accounted for and safe, a British diplomat, who spoke on condition of anonymity, told Reuters in Washington.

The diplomat said the attack likely flowed from Britain's November 21 decision to impose new sanctions on Iran because of its nuclear program, including a ban on British financial institutions dealing with their Iranian counterparts.

"It's impossible, really, not to reach that conclusion," the diplomat said, suggesting that the protests may have been sparked by the Iranian authorities.

"In the past we have certainly had demonstrations that have ... been sanctioned, if not encouraged, by the government. I don't know about this one. I don't think we'd put it past them," said the diplomat.

"It's hard to imagine, in a place like Iran, that these were some kind of spontaneous (event)," said a State Department official who declined to be identified.

INFIGHTING

The demonstrations appeared to be a bid by conservatives who control parliament to press home their demand, passed in parliament last week and quickly endorsed by the Guardian Council on Tuesday, for the government to expel the British ambassador in retaliation for the sanctions.

A lawmaker had warned on Sunday that angry Iranians could storm the British embassy.

"Parliament officially notified the president over a bill regarding degrading the ties with Britain, obliging the government to implement it within five days," Fars news agency quoted speaker Ali Larijani as saying.

Ahmadinejad's government has shown no willingness to compromise on its refusal to halt its nuclear work, but has sought to keep channels of negotiation open in an effort to limit the worst effects of sanctions.

An Iranian official told Reuters the storming of the British compounds was not planned by the government.

"It was not an organized measure. The establishment had no role in it. It was not planned," said the official, who declined to be identified. Iran's Foreign Ministry said it regretted the attacks and was committed to ensuring the safety of diplomats.

Police arrested 12 people who had entered the north Tehran compound, Fars said, quoting a police chief as saying they would be handed over to the judiciary.

Protesters said they planned to stage a sit-in at the gates of the north Tehran compound and would not move until they were told to do so by Iran's religious leaders.

Britain, along with the United States and Canada, imposed new unilateral sanctions on Iran last week, while the EU, France and Italy have all said financial measures against Tehran should be strengthened.

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