The security council has given Iran until August 31 to suspend its enrichment of uranium or face sanctions.

 

Iran says that its nuclear programme is entirely peaceful and will produce electricity and not atomic weapons.

 

But Philippe Douste-Blazy, the French foreign minister, said: "As we have always said ... a return to the negotiating table is tied to the suspension of uranium enrichment." 

 

He was speaking after a meeting with Tzipi Livni, Israel's foreign minister, on Wednesday.

 

On Tuesday, Iran sent a letter to the UN offering to hold further talks without offering an immediate suspension of enrichment.

 

France said that the UN is still preparing a response to the letter.


"It is a very long, complex document and we are studying it," Douste-Blazy said.

 

"In a few days, along with our European, American, Russian and Chinese partners, we will say what we think and what we will do at the UN security council," he said.

 

The five permanent UN security council members Britain, China, France, Russia and the United States, plus Germany, have offered Iran incentives to stop nuclear enrichment.

 

Oil producers prepare for crisis

 

Meanwhile, the International Energy Agency (IEA) has told oil exporting states to be prepared to increase production if Iran cuts off its oil exports in response to sanctions.

 

Claude Mandil, director-general of the IAE, said that if Iran stops exporting oil, he would want the Organisation of Petroleum Exporting Countries to increase their oil production.

 

The alternative is to use the world's emergency oil stockpiles.

 

"We are prepared for the possibility of releasing emergency supplies as always at the IEA. But we think our strategic stocks are only for use in the case of real supply disruption, and after other possibilities have been exhausted, in particular Opec spare capacity," Mandil said on Wednesday.

 

The oil weapon

 

Global oil producers have an estimated two million barrels per day (bpd) of un-used oil-producing capacity which could be switched on in an emergency.

 

In addition, the governments of the 26 IEA member countries own about 1.5 billion barrels of oil in strategic reserves, Mandil said.

 

That would be enough to compensate for the loss of Iran's 2.4 million bpd of oil exports for at least a year and a half.

 

The IEA members also have access to additional stockpiles totalling another 2.5 billion barrels that could be used if necessary, he said.

 

Using up stockpiles would leave the world with no oil stocks and no cushion to meet any further supply disruption.

 

If Tehran decides to stop exporting oil, Iran's income would fall sharply, but world oil prices would increase and the economies of Western oil-importing countries would be damaged.

 

Despite the continuing uncertainty over Iran's nuclear programme, oil prices fell on Wednesday with the price of crude oil dropping below $73 a barrel.