Recent revelations concerning Iran's nuclear programme have once again pointed in the direction of Pakistan as a source of nuclear proliferation in the region. According to the International Atomic Energy Agency (IAEA), tests of samples of enriched uranium found at the nuclear site in Iran had shown that these had originated from Pakistan. This was later confirmed by further matching the test results with data supplied by Islamabad. However, Pakistan's Prime Minister Kasuri has been quick to underline that Islamabad will in no case permit the IAEA to conduct inspections within its territory.

It appears that the disgraced Pakistani nuclear scientist, A Q Khan, had been responsible for the sale of the fissile material to Teheran. Khan, who at one time was hailed as "father" of the Pakistani bomb, had also acted as a conduit for passing on nuclear equipment to Iran. The equipment, it now turns out, had been supplied by Moscow to China, who in turn passed it on to Pakistan, where Khan had palmed it off to Iran. Whether such a complicated transaction could have taken place without the knowledge of the Pakistani authorities remains a moot point.

This coming from a country that the United States continues to project as a major ally in the war against terrorism is bound to cause some unease in Washington. It is awkward indeed. But then the United States could draw some consolation from the fact that Europe would be finding itself in an equally embarrassing situation. The European leaders had intervened last year and had managed to receive assurances from Teheran that its nuclear programme was entirely of a peaceful nature. But all such understanding fell apart when Iran announced, a few weeks ago, that it intended to resume work on its nuclear programme including that in the prohibited areas. This represents a major change of position on the part of the Iranian government.

Earlier, some critics, especially the United States, had raised doubts about the sincerity of Iran's protestations over the peaceful intent of its nuclear energy programme. It had pointed out that a country that was so rich in its petroleum resources would hardly need to depend on nuclear power. Iran, on the other hand, reiterated that it had a basic right to pursue work on its nuclear energy programme irrespective of the costs, and it would continue to do so.

But, with the latest Iranian statement of position, it is the turn of the Europeans to feel let down. The European intervention was informed by concerns that after the near fiasco of the search for weapons of mass destruction in Iraq, the region could ill afford another misadventure. Now, in retrospect, it would appear that hawks in Washington were closer to the mark than the doves on this side of the Atlantic.

How does one explain the shift in the Iranian position? There can be two possible answers. One, Iran might have come to hold the view that the United States and its allies had got so badly bogged down in their Iraqi misadventure that it could afford to cock a snook at Washington and get away with. A second, and a more likely, reason could be that Teheran is merely raising the stakes in the expectation that at some stage through the negotiations, it would be able to extract major concessions out of Washington. The concessions might take the form of nuclear know-how that Iran would need for developing its nuclear energy programme. There are precedents of offers of such concessions, including the North Korean case. In the process, Iran would expect to get the United States to deal with it directly, and thus pave the way for resumption of diplomatic relations with Washington that Teheran so keenly wants.

The IAEA will be meeting mid-September to consider action against Iran. It is quite likely that it will afford one more opportunity for Iran to come clean on its nuclear plans. In the event of it Iran's failure to do so, the IAEA could recommend sanctions against Iran at the December meeting. But that would be a rather extreme scenario. In view of the recent report on Iran put out by the Council for Foreign Relations in New York, there appear to be other compromise possibilities waiting to be explored on either side.