Financial Times FT.com

Iran on Wednesday ratcheted up the pressure on the European Union, warning the 27-nation bloc, which it accuses of meddling in its presidential election, that it was no longer qualified to hold talks on the Islamic republic’s nuclear programme.

Major-General Hassan Firouz-Abadi, the military chief of staff, declared that the alleged “interference of this [EU] in the post-election riots” means the bloc had “lost its qualification to hold nuclear talks.”

The statement highlighted the dilemma faced by western governments caught between the need to criticise the disputed June 12 election result which returned the hardline Mahmoud Ahmadi-Nejad to power, and the urgency of discussing with Tehran the fate of its nuclear programme.

No sooner had European governments questioned the election outcome, and condemned the repression of peaceful protests following the vote, that Tehran turned against them, accusing them – the UK in the lead – of instigating the unrest.

On Saturday, Tehran stepped up its accusations and detained nine local employees of the British embassy. Two remained in detention as of Wednesday night.

Fars, the semi-official news agency, on Wednesday said one of the employees (who has subsequently been released) had played a “remarkable role” in the post-election protests by the reformist opposition. The person, it said, had been “managing” the unrest behind the scenes.

The UK and other EU states are hoping the bloc will stage a co-ordinated protest against the detentions this weekend, with a possible “time-limited” withdrawal of the bloc’s ambassadors.

But some EU governments fear a withdrawal of ambassadors, even if temporary, could play into the hands of regime hardliners who want to re-establish their authority at home by underscoring the sense that Iran is a proud nation isolated from the outside world.

Tragically for the EU, which has been leading international diplomacy with Tehran, the election crisis comes at a time when governments were hoping to take advantage of a more moderate American policy. The Obama administration came into office offering a new page in relations with Tehran, and a revival of nuclear talks without precondition.

Europe and the US have also been seeking greater co-operation from Tehran in efforts to stabilise Afghanistan and Iraq, and more constructive engagement on other Middle Eastern crises.

But the US’ attempt to reach out to Iran has now been put on hold, amid increasingly tough statements from Barack Obama, the US president. Indeed, the administration could soon find itself under mounting pressure to impose new sanctions on the Islamic regime.

In Europe, meanwhile, governments have to consider whether to recognise the administration of Mr Ahmadi-Nejad, which the reformist opposition has declared illegitimate.

One issue being debated by UK diplomats is whether Britain should attend the formal inauguration of President Mahmoud Ahmadi-Nejad as the country’s president either later this month or in August.

Although a boycott would send a strong message of protest, officials say it could also suit the Iranian leadership’s “narrative” rather than the UK’s.

More broadly, there are concerns in Europe that if the EU takes a tough stance towards Iran in the next few months it may scupper any chance of making progress in negotiations on Iran’s nuclear programme, which remains the core issue of policy.

Fredrik Reinfeld, the Swedish prime minister, who now has the EU presidency said on Wednesday that Europe wants to support those standing up for democracy in Iran.

But he added: “We must ask ourselves the question: how can we support this and at the same time not ... polarise Iran from the rest of the world … That’s the balance we need to strike.”

Some EU diplomats take the view that the US and EU now have no option but to act more firmly.

“We can’t go back to business as usual,” said one. “There are some things we urgently want to discuss such as the nuclear file. But it has to be in our interests now, not Iran’s. The US now has to move to a harder headed diplomacy which may involve some form of contact with Iran but does not mean holding out the hand of friendship in the way they originally wanted to.”