Creating Iterations using java api

Yes, you can only setup a "standalone" enviroment to create iterations on the RTC. You need to download the RTC SDK and use the jars, like you said.

If somebody is looking for an live example , here is :
public void createIteration(ITeamRepository repo,
 IProgressMonitor monitor,
            String iterationName, String id, String startDate, String endDate)
            throws TeamRepositoryException {
        IAuditableClient fAuditableClient;
        fAuditableClient = (IAuditableClient) repo
                .getClientLibrary(IAuditableClient.class);

        CreateWI wi = new CreateWI();
        Date start = almDateFormat(startDate);
        Date end = almDateFormat(endDate);
        IProcessItemService service = (IProcessItemService) repo
                .getClientLibrary(IProcessItemService.class);
        List<IProjectArea> activeProjectAreas = new ArrayList();
        List<IProjectArea> allProjectAreas;
        IProjectArea iProjectArea = null;
        allProjectAreas = service.findAllProjectAreas(service.ALL_PROPERTIES,
                monitor);
        Iterator<IProjectArea> iterator = allProjectAreas.iterator();
        while (iterator.hasNext()) {
            iProjectArea = iterator.next();
            if (CommonString.PROJECT_AREA_NAME.equals(iProjectArea.getName())) {
                break;
            }
        }
        System.out.println(iProjectArea.getName());

        IDevelopmentLineHandle developmentLineHandler = iProjectArea
                .getProjectDevelopmentLine();
        IDevelopmentLine developmentLine = fAuditableClient.resolveAuditable(
                developmentLineHandler, ItemProfile.DEVELOPMENT_LINE_DEFAULT,
                monitor);

        IIterationHandle[] iterationHandle = developmentLine.getIterations();
        for (int i = 0; i < iterationHandle.length; i++) {
            IIterationHandle iterationList = iterationHandle[i];
            List handle = new ArrayList();
            handle.add(iterationList);
            IFetchResult result = repo.itemManager()
                    .fetchCompleteItemsPermissionAware(handle,
                            IItemManager.REFRESH, monitor);
            IIteration iteration = (IIteration) result.getRetrievedItems().get(
                    0);
            if (iteration.getName().equals(iterationName)) {
                System.out.println("Iterations already exist. cannot create. Iteration name: "+iteration.getName());
            }
        }
        IIteration newIteration = (IIteration) IIteration.ITEM_TYPE
                .createItem();
        newIteration.setName(iterationName);
        newIteration.setId(id);
        newIteration.setStartDate(start);
        newIteration.setEndDate(end);

        IDevelopmentLine workingDevLine = (IDevelopmentLine) developmentLine
                .getWorkingCopy();
        workingDevLine.addIteration((IIterationHandle) newIteration
                .getItemHandle());

        newIteration.setDevelopmentLine(workingDevLine);

        service.save(new IProcessItem[] { workingDevLine, newIteration },
                monitor);

    }

}