By Alistair Lyon, Special Correspondent
BEIRUT, Feb 11 (Reuters) - Revived Arab interest in nuclear power has prompted fears that Iran's atomic ambitions might ignite a new arms race in an already unstable Middle East.
Sunni Muslim countries such as Saudi Arabia, Egypt and Jordan, which are all U.S. allies, do not hide their worries about rising Iranian and Shi'ite Muslim influence in the region, as well as Tehran's suspected quest for nuclear weapons.
Although they and other Arab states from the Gulf to Algeria say they will pursue only peaceful nuclear schemes, some may also want the technology to react if Iran builds a bomb, not just the power plants Tehran says it is seeking.
The Arab world also resents Israel's presumed atomic arsenal, despite having lived with that threat for decades.
"With Israel having all but declared it has nuclear weapons capability, as well as Iran's ambitions, there obviously is concern that an Arab nuclear energy campaign could spark a regional nuclear arms race," said a diplomat in Vienna who knows the workings of the International Atomic Energy Agency (IAEA).
But formidable obstacles of cost, know-how and international scrutiny would face any Arab power seeking nuclear weapons -- previous efforts by Egypt, Iraq and Libya were all abandoned.
ECONOMIC RATIONALE
Arab countries offer economic justifications for exploring nuclear options in long-term energy strategies to conserve dwindling hydrocarbon reserves and meet rising demand as their economies grow and their populations expand.
"Some countries have oil and maybe they are not in a hurry to start a programme to build nuclear power plants tomorrow, but they are interested in feasibility studies," Mahmoud Nasreddin, director-general of the Arab Atomic Energy Agency told Reuters.
"It is wise to start thinking about diversifying their sources of energy -- solar, wind or nuclear," he said.
Such reasoning is valid, according to Hans-Holger Rogner, the IAEA's section head for planning and economic studies.
Arab fossil fuel reserves will run out one day. Nuclear power would allow a larger share of oil and gas to be exported, boosting hard currency revenue, and help counter global warming.
Even relatively small oil-exporting countries could muster the resources to develop nuclear power, Rogner argued.
"It's important that China is ready to assist in nuclear technology transfer in exchange for oil. In terms of financial resources, you have to ask what is the cost of not going nuclear," he said, citing rising prices of oil, gas and coal.
Such logic may hold water for Egypt and its North African neighbours, but it is harder to grasp the nuclear rationale for a colossal oil producer like Saudi Arabia, which announced plans for an atomic energy scheme with its Gulf partners last year.
Mark Fitzpatrick, an arms control expert at London's International Institute of Strategic Studies, said the idea of a "security hedge" against Iran influenced Arab nuclear thinking.
"The ripple effects are one of the main reasons why we are all concerned about Iran acquiring a nuclear weapons capability," he said. "It's a very real prospect."
POWER POLITICS
Economic reasons aside, Egypt may see a nuclear capacity as enhancing its Arab leadership aspirations, said Walid Kazziha, a political science professor at the American University in Cairo.
It would also have political appeal, he said, noting that Cairo's nuclear plans were first floated by Gamal Mubarak, seen as a possible successor to his father, President Hosni Mubarak.
Renewed Arab interest in nuclear power coincides with a U.S. drive to line up Sunni Arab allies to confront Iran, rather than encourage a dialogue aimed at reaching a modus vivendi.
"The Americans have no interest in having such a compromise and they would want the Saudis, as well as the other Arabs, to stand and mobilise against the Iranians," Professor Kazziha said.
Some Arab countries want to position themselves for the "what-if" scenario of an Iranian atom bomb, analysts say.
"The danger (of proliferation) is there when rationality pops out of the equation. But you still have to balance the inherent risks with all the benefits that come with nuclear power and the IAEA safeguards that would be fully deployed," said the Vienna-based diplomat familiar with the IAEA.
Nuclear suppliers might insist that Arab states do not emulate Iran by pursuing dual-purpose activities that can be used for bomb-making, like uranium enrichment and reprocessing.
They might also press them to sign the Additional Protocol to the Non-Proliferation Treaty, allowing short-notice IAEA inspections to check for any clandestine military programme.
Egypt already has nuclear cooperation offers from China, Russia and Kazakhstan. Western countries might follow suit.
"If Egypt were to accept the Additional Protocol and forego its right to enrichment and reprocessing, the United States would be very keen to help out," the analyst Fitzpatrick said.
