Boston, MA -- (SBWIRE) -- 05/31/2012 -- By the end of March 2012 it was still unclear whether the crisis surrounding Iran's nuclear programme would reach a diplomatic or military conclusion.

Having just held talks with the US president, Barack Obama, at the Seoul Nuclear Summit, the Turkish prime minister Recep Tayyip Erdogan visited Tehran in late March for meetings with his Iranian counterpart, Mahmoud Ahmadinejad. His trip was interpreted as preparation for a make-or-break mid- April summit, possibly to be held in Istanbul, involving Iran and the group of countries known as the P5+1: China, France, Germany, Russia, the UK and the US. Erdogan's intervention was seen as critical because he shares some common ground with those on both sides of the argument, and is therefore someone who could help broker a peaceful solution.

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The summit could offer Iran a diplomatic lifeline, as sanctions begin to ramp up pressure on its economy and Israel makes preparations to launch military action to prevent Iran from obtaining a nuclear weapon. Iranian oil exports fell in March, and Chinese purchases declined significantly (due to a pricing dispute, rather than any Chinese decision to fall in line with Western sanctions). With EU imports also set to drop off over the next few months as sanctions kick in, Iran faces a very tough economic outlook unless it can reach a deal. However, there was some good news for Iran in late March when the US decided to exempt 10 EU countries and Japan, which had already reduced their imports, from the sanctions.

Parliamentary elections in March appeared to pile more political pressure on Ahmadinejad, whose party failed to win a majority and whose sister suffered defeat in her electoral constituency. However, it was unclear how successful an opposition call for voters to boycott the election had actually proved, with no independent verification of the turnout available.

In February Ahmadinejad announced that he was more than doubling the country's defence budget by ordering a 127% increase, although he did not disclose Tehran's current level of defence spending. Iran also unveiled a series of new military systems, which underlined the fact that attacking the country could pose some serious tactical challenges to US or Israeli forces. State TV profiled a new unmanned aerial vehicle (UAV) called the Shaparak in March, while defence minister General Ahmad Vahidi announced in February that a new anti-ship cruise missile, the Zafar, had entered series production. Vahidi also said that the Iranian defence industry had successfully developed a new type of guided artillery shell.

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