In an interview on German television, Merkel said Iran's reply is missing a "decisive sentence" on whether it has agreed to halt uranium enrichment.
"We are still reviewing [the Iranian response]," she said. "But from everything I have heard, we cannot be satisfied. What we expected was not [in Iran's statement] -- namely, that [Iran] suspends uranium enrichment, will come to the negotiating table, and then speak about the chances and possibilities for Iran."
U.S. President George W. Bush discussed Iran's response on August 23 in a telephone call with UN Secretary-General Kofi Annan, who is expected to travel to Iran in the coming days.
Details of Iran's response have not been released, but France and the United States have also labelled it unsatisfactory.
The UN has demanded Iran freeze uranium enrichment by August 31 or face possible sanctions.
Ahmadinejad's Letter To Merkel
Meanwhile, Reuters has obtained a copy of a letter from Iranian President Mahmud Ahmadinejad to Merkel. Ahmadinejad sent the letter in July but its contents were not made public.
In the letter, Ahmadinejad wrote that Germany and Iran have both been subjected to "tyranny" by the victors of World War II and should cooperate to end the "imposed" world order.
Merkel rejected the letter last month as "totally unacceptable to Germany."
(compiled from agency reports)
Comprehensive sanctions could further slow development in Iran's strategic oil and gas sectors (Fars)
WHAT DOES TEHRAN REALLY THINK? On August 22, Radio Farda correspondent Fatemeh Aman spoke with Alex Vatanka, Eurasia editor for Jane's Information Group, by telephone from Alexandria, Virginia. Vatanka discussed the possible impact that comprehensive sanctions could have for Iran.
Radio Farda: Some Iranian authorities are trying to create the impression that they aren't concerned about the possibility of international sanctions against it. They emphasize that what Iran has achieved so far has happened despite the sanctions already in place against it. Are they really not afraid of sanctions?
Vatanka: I think that what the Iranians are trying to do is to continue to play this balancing act. On the one hand, they are trying to say, "Look, we have done without you for 27 years; we can continue." On the other hand, if you look at every other major Iranian overture toward the U.S., obviously what they are hoping to do is remove those sanctions. It is the sanctions that have been the biggest obstacle to a genuine expansion in the Iranian economy. It is the sanctions and U.S. policies vis-a-vis Iran that have, for instance, kept Iran from joining the World Bank. It is sanctions and so on that have made the Iranian oil industry have such a tough time in bringing investment into the strategic oil and gas sectors. People like [former Iranian President Ali Akbar Hashemi-]Rafsanjani back in the mid 1990s even kept certain fields untouched because the idea was that U.S. companies should have those once the sanctions were lifted.
I think sanctions are quite important to the Iranians, but at the same time what they are trying to say is, "Don't assume that we are going to fall off our chair just because you mentioned the sanctions card." It is part of a kind diplomatic chess game going on by Tehran. But remember if we look and listen to Iranian reformists, this is being openly debated inside Iran. The question that is being asked of [President Mahmud Ahmadinejad and his entourage] is, "What is the ultimate objective?" Is it just Islamic independence? Is it just the ability to enrich uranium? The debate in Iran by the reformists -- and I think a lot of people would sympathize with this -- is, "What are we being sanctioned for exactly and what policies do you have to make sure that those sanctions don't hit us harder than we have already been hit?"
Remember, the big issue here is this: Iran has been sanctioned by the U.S. Iran has never faced comprehensive United Nations sanctions. The Iranian people have never suffered on a scale that the Iraqi people, for instance, suffered because of such sanctions. So it is kind of disingenuous of these senior leaders to pretend that Iran has already gone through comprehensive sanctions. Iran has not. And it will be totally different set of circumstances that will have a totally different impact on Iranian society and the economy, should the UN impose comprehensive sanctions on the country.
THE COMPLETE PICTURE: RFE/RL's complete coverage of controversy surrounding Iran's nuclear program.
An annotated timeline
of Iran's nuclear program.