U.S. Report Casts New Doubt on Russia-Iran Deal : Diplomacy: Intelligence sources say Moscow official has secretly talked to Iran about selling weapons-grade uranium.

Less than two weeks before a critical meeting between the two nations, tension between the United States and Russia has escalated over a U.S. intelligence report that Moscow’s intended sale of a nuclear reactor to Iran might include weapons-grade uranium, U.S. officials said.

Although U.S. officials said Russian explanations have eased their concerns, the report has injected new doubt into the continuing dispute over the sale. It appears certain that the two nations will butt heads over the deal when President Clinton visits Moscow for a V-E Day celebration and summit talks on May 9-11.

The U.S. intelligence report said the head of Russia’s nuclear energy agency secretly talked to Iran about selling weapons-grade uranium.

Such a development, which goes well beyond the issue of providing alternative energy sources for Iran’s burgeoning population, potentially could help Tehran move a step closer to making nuclear weapons, Administration sources said.

In talks with the President and Secretary of State Warren Christopher in Washington this week, Russian Foreign Minister Andrei V. Kozyrev said Russian nuclear official Viktor Mikhailov was not acting on behalf of his government in discussing with Iran a deal including weapons-grade uranium--uranium that is enriched 90% or more.

Moscow will not follow through on the talks, Kozyrev told the White House.

While expressing concern, Administration officials said the latest round of tension has been defused “for the time being. The reassurances we have (been given) seem to address the problem,” a senior U.S. official noted. “We are taking whatever steps are available to us to ensure that Iran does not develop a nuclear capability. On those grounds, we will continue to monitor Iran and those who do business with Iran.”

While providing assurances on the uranium, Moscow has indicated that it will not back down on the nuclear reactor sale. Russia is holding firm, despite Administration pressure that includes providing Moscow with U.S. intelligence on Iran’s nuclear weapons effort and holding out the prospect that Russia could share in a $4.5-billion U.S.-North Korea nuclear deal.

In a speech at Johns Hopkins University, Kozyrev said Friday that Russia remains committed to its deal with Iran. “I don’t see why it should be stopped,” he said. “It is only beneficial if Iran buys Russian light-water reactors--safe from the point of view of proliferation--rather than (that) we abrogate the deal and they try to buy, somewhere, probably much more dangerous equipment.”

Moscow signed an agreement with Iran in January to build at least two light-water nuclear reactors, a sale that could inject up to $1 billion into Russia’s deeply troubled economy.

Iran’s nuclear program was started by German contractors who abandoned it after the 1979 revolution toppled Shah Mohammed Reza Pahlavi. Iran’s population has since doubled to 62 million, leading to even greater need for energy.

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Russian engineers recently have inspected the original reactor site at Bushehr on the Persian Gulf. Kozyrev said Iran’s reactor would be under the full supervision of the International Atomic Energy Agency and noted that Tehran is a signatory to the nuclear Non-Proliferation Treaty.

U.S. intelligence claims that Tehran is on a crash program to produce nuclear weapons, although it is still believed to be years away from such capability. Having a reactor might help that process, since spent fuel from power stations could be diverted for producing nuclear weapons.

But like reactors the United States is offering North Korea, the fuel of the Russian light-water reactors is difficult to convert to weapons use, Kozyrev said. Light-water reactors are usually fueled with uranium enriched 3% to 4%. The seller of a reactor normally provides a source of fuel, which is put into bundles and is easy to monitor, said Leonard Spector of the Carnegie Endowment for International Peace.

Iran has a small research reactor at Tehran University that operates on 20% enriched uranium--again material not considered suitable for weapons. Built by the United States during the monarchy, it originally operated on weapons-grade fuel that the United States provided. After the revolution, Washington stopped providing weapons-grade fuel; Argentina modified the reactor to take the lower-grade fuel.

Among the possibilities to explain Iran’s interest in higher-grade fuel: It may want a more powerful research reactor or it may want to modify the existing reactor to its original power, Spector said. Either reason could be a cover for procuring enriched uranium for a weapons program.

“We will not give Iran or any other country any nuclear weapons capability or technology,” Kozyrev said Friday.

Meantime, the State Department on Friday released its annual survey of international terrorism, which reports that Iran is the leading state sponsor of such activities.

“Iran continues to assassinate dissidents abroad,” Philip Wilcox Jr., U.S. coordinator for counterterrorism, said at a State Department briefing Friday. “It maintains direct support for Hezbollah, one of the most dangerous and lethal terrorist organizations. It continues to support the fatwa (death sentence) against (British author) Salman Rushdie. And it is using its resources, money, materiel to support those groups which are using terrorism against the peace process.”

Iran’s activity stood out particularly in a year when terrorism declined around the world. Incidents of international terrorism dropped 25% in 1994, to the lowest level in 23 years, the new report said.