On 14 August 2002, Alireza Jafarzadeh, a spokesman for an Iranian dissident group National Council of Resistance of Iran, publicly revealed the existence of two nuclear sites under construction: a uranium enrichment facility in Natanz (part of which is underground), and a heavy water facility in Arak. It has been strongly suggested that intelligence agencies already knew about these facilities but the reports had been classified.
The IAEA immediately sought access to these facilities and further information and co-operation from Iran regarding its nuclear program. According to arrangements in force at the time for implementation of Iran's safeguards agreement with the IAEA, Iran was not required to allow IAEA inspections of a new nuclear facility until six months before nuclear material is introduced into that facility. At the time, Iran was not even required to inform the IAEA of the existence of the facility. This "six months" clause was standard for implementation of all IAEA safeguards agreements until 1992, when the IAEA Board of Governors decided that facilities should be reported during the planning phase, even before construction began. Iran was the last country to accept that decision, and only did so 26 February 2003, after the IAEA investigation began.
In May 2003, shortly after the U.S. invasion of Iraq, elements of the Iranian government of Mohammad Khatami made a confidential proposal for a "Grand Bargain" through Swiss diplomatic channels. It offered full transparency of Iran's nuclear program and withdrawal of support for Hamas and Hezbollah, in exchange for security assurances from the United States and a normalization of diplomatic relations. The Bush Administration did not respond to the proposal, as senior U.S. officials doubted its authenticity. The proposal reportedly was widely blessed by the Iranian government, including Supreme LeaderAyatollah Khamanei.
France, Germany and the United Kingdom (the EU-3) undertook a diplomatic initiative with Iran to resolve questions about its nuclear program. On 21 October 2003, in Tehran, the Iranian government and EU-3 Foreign Ministers issued a statement known as the Tehran Declaration in which Iran agreed to co-operate with the IAEA, to sign and implement an Additional Protocol as a voluntary, confidence-building measure, and to suspend its enrichment and reprocessing activities during the course of the negotiations. The EU-3 in return explicitly agreed to recognize Iran's nuclear rights and to discuss ways Iran could provide "satisfactory assurances" regarding its nuclear power program, after which Iran would gain easier access to modern technology. Iran signed an Additional Protocol on 18 December 2003, and agreed to act as if the protocol were in force, making the required reports to the IAEA and allowing the required access by IAEA inspectors, pending Iran's ratification of the Additional Protocol.
The IAEA reported 10 November 2003, that "it is clear that Iran has failed in a number of instances over an extended period of time to meet its obligations under its Safeguards Agreement with respect to the reporting of nuclear material and its processing and use, as well as the declaration of facilities where such material has been processed and stored." Iran was obligated to inform the IAEA of its importation of uranium from China and subsequent use of that material in uranium conversion and enrichment activities. It was also obligated to report to the IAEA experiments with the separation of plutonium. However, the Islamic Republic reneged on its promise to permit the IAEA to carry out their inspections and suspended the Additional Protocol agreement outlined above in October 2005. ------ ...