LONDON (Reuters) – World leaders voiced hope on Tuesday that a major prisoner exchange between Israel and the Palestinians would help reinvigorate a peace process frozen for more than a year.

But while the release of Israeli soldier Gilad Shalit from Hamas-ruled Gaza in return for 477 Palestinians detainees was celebrated on both sides, it did not address any core disputes that have bedevilled peace talks for 20 years, analysts said.

There was no sign from Israel or Hamas, an Islamist group sworn to its destruction, or the Palestinian Authority of President Mahmoud Abbas, who favours negotiated peace, that the Egyptian-brokered deal could be a starting point for dialogue.

Still, world leaders nevertheless saw room for hope in an improvement of the regional atmosphere laying groundwork for a revival of peace talks shelved last year over Israel’s continued expansion of settlements in the occupied West Bank.

“I would like to believe that this will permit the taking up again of discussions” between the Israelis and Palestinians, said French President Nicolas Sarkozy. “When everyone is speaking to each other, it facilitates things.”

“For France, it’s a very big relief, it’s a great joy and it proves that even in the most difficult moments, there can be hope,” Sarkozy said in southern France. Shalit holds dual French nationality and Paris has closely followed his plight.

British Foreign Secretary William Hague urged Israel to build on the momentum provided by the release of Shalit to advance peace talks with the Palestinians.

LONDON, June 20 (Reuters) – European media condemned the EU’s ‘shambolic’ Greek crisis management and fretted the bloc was pouring money down an endless drain by giving aid to discredited political leaders in Athens.

Some commentators said on Monday a swelling popular backlash in Greece against yet harsher frugality was driving the country towards the disastrous default a rescue is supposed to prevent.

Austrian mass-circulation tabloid Oesterreich, expressing rising taxpayer resentment around the EU, called for an EU-wide plebiscite “to let those who have to pay for Greece decide” whether to rescue it again or preserve “a euro without Greece”.

Euro zone finance ministers on Sunday postponed a final decision on extending 12 billion euros ($17 billion) in emergency loans to Greece, saying the Greek parliament first had to enact laws on fiscal reforms and selling off state assets. [ID:nLDE75I0FM] [ID:nDE75J0AY]

A vote is expected by the end of June but Greece’s political elite is under widening, intensifying popular pressure to dilute if not postpone the next round of financial shock therapy sought by markets to curb systemic Greek profligacy and corruption.

“It is a win that all 17 (Euro zone) states have said for the first time the private sector must be involved and that (the contribution) should be substantial,” Dutch finance minister Jan Kees de Jager told Dutch radio.

“But there’s still a long way to go,” de Jager said. “Will Greece be able to get all the painful measures passed through the parliament in coming days? Without that, we will not be involved. It is important that pressure is kept on Greece.”

VIENNA (Reuters) – With big powers unable to agree tough new sanctions against Iran and military action rife with risks to the West, Cold War-style containment may prove the only realistic way to check Tehran’s nuclear ambitions, experts say.

Other factors supporting this argument include an Islamic ruling elite in Iran whose anti-Western ethos precludes negotiated rapprochement and a U.N. inspection regime too weak to catch any covert attempt to develop atomic bombs in a timely fashion.

U.S. Secretary of State Hillary Clinton’s airing last year of how Washington might handle a nuclear-capable Iran, by arming Gulf allies and creating a regional defense shield, stunned and angered Israel, which considers Tehran an existential menace.

Obama administration officials hastened to stress then and continue to say now that the world cannot allow a nuclear Iran and harsher sanctions will help forestall any such scenario.

But even Israel’s defense minister has suggested an Iran with nuclear “breakout” ability would not doom the world, and policymakers should have a strong fallback plan — even if they don’t say it publicly — if sanctions fail to restrain Iran.

“I don’t think the Iranians, even if they got the bomb, are going to drop it immediately on some neighbor. They fully understand what might follow. They are radicals, but not total ‘meshugenah’,” Ehud Barak said in a speech last month.

He was using the Yiddish word for “nut cases,” and alluding to the certain threat to Iran of annihilation by foes with massively greater nuclear firepower — Israel and the United States — if it started a nuclear conflict.

VIENNA (Reuters) – The United States and European Union accused Iran of breaking nuclear transparency rules by escalating uranium enrichment without proper U.N. surveillance and said its “provocative” behavior invited tougher sanctions. They spoke at a tense meeting on Wednesday of governors of the United Nations nuclear agency, a day after the U.N. Security Council said it was ready to tackle Western powers’ proposals for new sanctions on Iran, which China has so far resisted.

A diplomat in the closed-door, 35-nation International Atomic Energy Agency meeting said China’s ambassador reiterated that more negotiations, not sanctions against its major trade partner, must be pursued.

IAEA director Yukiya Amano, in a February 18 report to the U.N. watchdog’s governors, said for the first time that intelligence showed Iran may be trying to design a nuclear-armed missile now, instead of only in the past — as Washington assessed in 2007.

U.S. and EU envoys told the meeting they shared his concern.

Amano also said Iran began higher-grade uranium enrichment on February 9 before his inspectors could get to the scene and beef up monitoring. Diplomats said Iran was refusing to allow more cameras and inspections at very short notice.

Iran’s IAEA envoy Ali Asghar Soltanieh said Amano’s report had “misled the public” and was “not balanced and factual.” He said Tehran alerted inspectors by letter two days before the enrichment boost, in keeping with safeguards obligations.

Soltanieh implied that Iran could quit the Non-Proliferation Treaty (NPT) if it could no longer expect to be treated justly.

PARIS/VIENNA (Reuters) – Russia will back new sanctions against Iran as long as they do not create a humanitarian crisis, French President Nicolas Sarkozy said on Monday after talks with Russian counterpart Dmitry Medvedev.

Medvedev said he still hoped to avoid new punitive measures, but added Russia could not wait forever for cooperation by Tehran, suspected by the West of developing nuclear weapons.

“We are optimists and we are not losing the feeling that we may achieve success,” Medvedev said. “Nonetheless, if it doesn’t work out … Russia is ready to consider with our other partners the question of introducing sanctions.

Sarkozy told reporters: “(Medvedev) told me of his receptiveness to the question of sanctions so long as they don’t create humanitarian dramas.”

Israel, which sees itself directly threatened by any Iranian nuclear breakthrough, voiced optimism that China would not veto any new U.N. Security Council sanctions, saying Beijing had listened attentively to a visiting Israeli delegation.

Russia, and even more so China, have been reluctant in the past to endorse any broader sanctions against Iran, which denies seeking nuclear weapons.

A draft fourth Security Council resolution is expected as soon as this week. Some Western diplomats have predicted it would contain a “symbolic” tightening of sanctions against Iranian government assets like the Revolutionary Guard Corps.

VIENNA (Reuters) – The new U.N. nuclear agency chief said on Monday his report Iran could be trying to develop a nuclear-armed missile was factual and impartial, rejecting Iranian suggestions he was biased toward Western powers.

Yukiya Amano spelled out a “clear” approach to Iran’s nuclear activity after what diplomats said was the reluctance of his predecessor Mohamed ElBaradei to confront Iran due to his skepticism about the veracity of Western intelligence on Tehran.

Amano’s blunter line on Iran could be significant if it increases momentum toward harsher United Nations sanctions on Iran. Six world powers have begun deliberations on more sanctions at U.N. Security Council level in New York. In an address to the U.N. agency’s board of governors and a news conference, Amano did not repeat a politically sensitive reference in a February 18 report on Iran about “the possible existence in Iran of past or current undisclosed activities related to the development of a nuclear payload for a missile.”

Diplomats said Amano’s reticence on Monday may have been a gesture to dampen tensions within the IAEA’s governing body after a developing nation bloc, to which Iran belongs, suggested his report was not sufficiently balanced.

“In my view, this report is factual and absolutely impartial. That is the essence … it took stock of the whole picture. I wanted the report to be clear, straightforward, easy to read and understand,” Amano told reporters.

He said intelligence information that hardened the IAEA’s disquiet about possible nuclear weapons-relevant activity in Iran was collected from multiple sources and was consistent in detail, timeline, and Iranian officials and agencies cited.

“We have an integrated team of experts, we have experience. And the information is extensive. We cross-check it. After this process, we are saying that altogether it raises concern.”

VIENNA (Reuters) – Iran has moved a stock of enriched uranium back underground after drawing what it needed to refine the material up to 20 percent purity, Tehran’s envoy to the U.N. nuclear watchdog said on Monday.

He dismissed media speculation that Iran had placed a large amount of the material in a visible spot above ground to provoke an Israeli air strike that would give Iran a pretext to expel U.N. inspectors and develop atom bombs for security reasons.

Iran has said its move to feed low-enriched uranium (LEU) into centrifuges for higher-scale refinement is to make fuel for a medical isotope reactor.

Western officials and U.N. inspectors doubt Iran’s explanation since it lacks the technical capacity to convert higher-enriched uranium into fuel rods for the reactor, whose Argentine-provided fuel stock is running out.

They fear Iran wants to advance along the road to producing high-enriched — 90 percent purity — uranium suitable for the fissile core of an atomic bomb, if it chose later to do so.

Diplomats also questioned why Iran had moved 94 percent — 1.95 tonnes of its LEU reserve out of its main, subterranean enrichment plant at Natanz, a much larger amount than would be needed to produce fuel for the reactor in the medium term.

“(This) was merely for producing material for the Iran research reactor. That is why that container is (now) back to its original location,” Ali Asghar Soltanieh, Iran’s ambassador to the International Atomic Energy Agency, told reporters.

VIENNA/WASHINGTON (Reuters) – The U.N. nuclear watchdog said on Thursday it fears Iran may be working now to develop a nuclear-armed missile, as Washington warned Tehran of “consequences” for ignoring international demands to stop its atomic program.

In unusually blunt language, an International Atomic Energy Agency report for the first time suggested Iran was actively pursuing nuclear weapons capability, throwing independent weight behind similar Western suspicions.

The IAEA seemed to be cautiously going public with concerns arising from a classified agency analysis leaked in part last year which concluded that Iran has already honed explosives expertise relevant to a workable nuclear weapon.

The report also confirmed Iran had produced its first small batch of uranium enriched to a higher purity — 20 percent.

Both developments will intensify pressure on Iran to prove it is not covertly bent on “weaponizing” enrichment by allowing unfettered access for IAEA inspectors and investigators, something it rejects in protest at U.N. sanctions.

The United States is already leading a push for the U.N. Security Council to impose a fourth round of sanctions on Iran because of suspicions it may be developing nuclear weapons and has received declarations of support from Russia, which has until now been reluctant to expand sanctions.

“We always said that if Iran failed to live up to those international obligations, that there would be consequences,” White House spokesman Robert Gibbs told reporters aboard Air Force One as President Barack Obama flew to a political event.

VIENNA (Reuters) – Uranium particles found at a Syrian desert complex bombed to ruin by Israel in 2007 point to possible covert nuclear activity at the site, the U.N. atomic watchdog said Thursday.

It was the first time the International Atomic Energy Agency lent public support to Western suspicions that Israel’s target was a nascent nuclear reactor that Washington said was North Korean in design and geared to making weapons-grade plutonium.

Previous IAEA reports on its two-year investigation into the affair, impeded by a lack of Syrian cooperation, said only that the uranium particles raised concern because they did not come from Syria’s declared inventory.

“The presence of such particles points to the possibility of nuclear-related activities at the site and adds to questions concerning the nature of the destroyed building,” said the confidential report by new IAEA Director-General Yukiya Amano, obtained by Reuters.

“Syria has yet to provide a satisfactory explanation for the origin and presence of these particles,” he wrote, dismissing Damascus’s contention that the traces came with munitions used by Israel to wreck the complex.

In what analysts called another departure from predecessor Mohamed ElBaradei, Amano prodded Syria to adopt the IAEA’s Additional Protocol, which permits unfettered inspections beyond declared nuclear site to ferret out any covert atomic activity.

SYRIAN STONEWALL

VIENNA (Reuters) – Malaysia has dismissed its envoy to the U.N. nuclear watchdog for voting against a resolution rebuking Iran and he will be replaced as rotating head of the agency’s governing body later this week.

The rare removal of a senior serving diplomat on the International Atomic Energy Agency’s board of governors underlined the volatile politics and high stakes in policymaking involving Iran’s disputed nuclear program.

Malaysian Ambassador Mohd Arshad Manzoor Hussain, a 35-year diplomatic veteran, told Reuters he had been dismissed by his government after being recalled to Kuala Lumpur following the November 27 vote and several weeks of consultations.

Diplomats said the Malaysian government acted after the United States expressed concern to it over the envoy’s vote.

The Malaysian Foreign Ministry said in December that Hussain disregarded orders by voting “no” to a resolution passed by a 25-3 margin with six abstentions to censure Iran for building a second uranium enrichment plant in secret.

“I am very disappointed at this development as I had hoped my government would renew my contract to enable me to complete my mandate as chairman,” Hussain said in Vienna, where he had returned to await his government’s decision. “This has not happened and I just have to accept it as my fate.”

The IAEA board will hold a one-day meeting on Friday to appoint a successor, identified in a confidential memo obtained by Reuters as Muhammad Shahrul Ikram Yaakob, previously Malaysia’s ambassador in Qatar.