The absorption feature detected in the prompt X-ray emission of GRB 990705
bears important consequences. We investigate different production mechanism
s, and we conclude that the absorbing material cannot be very close to the
burster and is likely to be moderately clumped. These properties challenge
any model in which the burst explodes in coincidence with the core collapse
of a massive rotating star. We show that the straightforward interpretatio
n of the absorption feature as a photoionization K edge of neutral iron fac
es a severe problem in that it requires a huge amount of iron in the close
vicinity of the burster. We then discuss an alternative scenario in which i
ron ions are kept in a high-ionization state by the burst flux and the abso
rption feature is produced by resonant scattering from hydrogen-like iron b
roadened by a range of outflow velocities. In this case, the physical condi
tions and geometry of the absorbing material are fully consistent with the
presence of a young supernova remnant surrounding the burst site at a radiu
s R similar to 10(16) cm. We finally discuss how this remnant might affect
the generation of afterglows with a standard power-law flux decay.