The panel, headed by former UN chief weapons inspector Hans Blix, also wants New Delhi and Islamabad to join states which have declared a moratorium on the production of fissile material pending a treaty and increase transparency in the nuclear and missile activities.
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"The reality is that if the US were to ratify (the CTBT), then China would. If China did, India would. If India did, Pakistan would. If Pakistan did, then Iran would. It would set in motion a good domino effect," Blix told a news conference at which he released the report Wednesday.
Launching the 227-page report, "Weapons of Terror," Blix said, "the first line of defense against the spread of nuclear weapons is indeed to make states feel that they don't need them."
The recommendations, which are unlikely to go down well in several states, also suggested that both Iran and Israel commit themselves against enriching uranium under international safeguards as part of wider effort to establish a mass destruction weapon free zone in the Middle East.
"As confidence building measures, all states in the region (Middle East), including Iran and Israel, should for a prolonged period of time commit themselves to a verified arrangements not to have any enrichment, reprocessing or their sensitive fuel-cycle activities on their territories," said the Commission.
On Iran, Blix said that "the issue was not whether it has produced or not produced nuclear weapon of mass destruction but whether it has the capacity. The government change frequently and sometime are even overthrown. A political decision could change everything if a country has the technology and the know how," he said.
The report is highly critical of the United States' unwillingness to cooperate in international arms regimes which, it asserts, undermines the effort to curb nuclear weapons.
"If it (US) takes the lead, the world is likely to follow. If it does not take the lead, there could more nuclear tests and new nuclear arms races," it added.
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The Commission was appointed by the Swedish government which bore most its expenses, but Blix said it never interfered. The panel included Director of the Delhi Policy Group and President of Center for Security Analysis, Chennai, V R Raghavan and former UN Under Secretary General for Disarmament Affairs and declared candidate for the post of UN Secretary General Jayantha Dhanapala of Sri Lanka.
Replying to questions on whether Tehran could be trusted, Blix said it was "not inconceivable" that some Iranian groups see 130,000 American troops in Iraq and American bases in Afghanistan and Pakistan as security threat to their country.
The Commission, he said, saw no objection to Iran's pursuit of nuclear science but still it viewed as "desirable" for Iran to stop enriching uranium.
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Negotiations, not military action, should be preferred tool for counteracting nuclear threats and in case of Iran foreign policy should help in achieving the goals.
The report contained 60 recommendations to tackle problems posed by weapons of mass destruction, with a full chapter devoted to the role of the United Nations and the Security Council in that area.
Among the Commission's recommendations was that another world summit be held to make up for the "failure" of the 2005 World Summit to address the question of disarmament, non-proliferation and arms control.
Stringent Cold War-era rules governing the United Nations Conference of Disarmament in Geneva -- the world's main forum for negotiations on disarmament -- should be modified so that the items could be tabled with a two-thirds majority, rather than requiring consensus.
The commission estimated that there were 27,000 nuclear weapons in the world, with 12,000 of them deployed, numbers it labeled "extraordinarily and alarmingly high."
Blix said he feared the number of nuclear weapons would rise because of efforts to develop more sophisticated new weapons and place them in space. He also feared an American-proposed missile shield would bring about countermeasures by Russia and China.
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