SO, what now? Iran has defied the United Nations order to stop its most controversial nuclear work.

It looks as if there will be a fudge by the European Union, dragging the US along behind. At yesterday’s deadline, which was supposed to be the climax of this long-running stand-off, Europeans blinked first.

Germany and Italy, in particular, have taken the view that more talks would be preferable to sanctions, even at the cost of blurring the force of the UN Security Council demand.

That has played into the hands of Russia and China, who never much wanted sanctions. It has left the US, Britain, and France, who favoured an immediate move to sanctions, frustrated on the sidelines.

Why the change since the aggressive brinksmanship of early this summer? Lebanon, in a word. In the strained attempts to muster a UN force to keep the peace between Israel and the Iranian-backed Hezbollah, few want to pick a new fight with Tehran. Iran has accurately gauged the limited appetite for confrontation among its adversaries and divided them.

There have been three signs this week of the fudge. First, Javier Solana, the European Union foreign policy chief, said that he and Ali Larijani, Iran’s chief negotiator, would meet soon, after a phone conversation yesterday. Secondly, Angela Merkel, the German Chancellor, said that although “we cannot act as if nothing had happened” in Iran’s refusal, “we will not slam the door shut”.

Thirdly, the new Italian Government of Romano Prodi has made clear that it wants a bigger say than its predecessor in determining Europe’s relations with Iran. Italy, which is Iran’s leading commercial partner in the EU, with trade worth $4.7 billion, has also taken the lead military role in Lebanon, backed up by France.

Earlier this week Massimo D’Alema, Foreign Minister, said that Italy would use its seat on the Security Council from January “to make the UN hear the voice of the EU better and with more force”.

These factors have blunted the plans sketched out by Britain, France and the US for imposing sanctions. One senior British official said yesterday that “no one would have expected sanctions to go ahead from September 1” and that “the sanctions process will happen in parallel” with any more talks with Iran.

The US is also taking a softer line. Sean McCormack, State Department spokesman, said that even when sanctions talks began, Iran could still halt the work and be rewarded.

The “sanctions process” will begin with a meeting on Thursday in Berlin between the political directors of Britain, the US, France, Russia and China, the permanent members of the council, plus Germany. They will try to agree on whether to impose the softest sanctions on a list that they drew up earlier in the summer. The list begins with penalties on people and companies involved in Iran’s ballistic missile industry.

But there seems little chance of securing Russian and Chinese support for sanctions that would hit the political class and the economy generally — not even for those targeting the nuclear industry.

China has contracts with Iran to buy oil and gas, which it badly needs, while Russia has lucrative work building Iran’s first nuclear power plant.

The start of sanctions talks “never meant excluding further contacts with Iran”, said a British official. All the same, as deadlines go, yesterday’s passed with a whimper not a bang, to Iran’s advantage.

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