Powers mull Iran atom compromise--senior diplomat

VIENNA, June 29 (Reuters) World powers are debating the idea of offering Iran a pause in seeking further sanctions over its nuclear programme if Tehran stops expanding uranium enrichment, a senior diplomat said.

The United States and major European allies publicly stand behind UN Security Council resolutions that demand a complete Iranian suspension, not just slowdown, of enrichment and have imposed two sets of sanctions over Tehran's refusal to do so.

Iran says it is refining uranium only for electricity so it can export more of its lucrative oil and gas. The West suspects Iran is secretly striving to make atom bombs, citing its stonewalling of investigations by the UN nuclear watchdog.

The United States, Britain, France, Germany, Russia and China have begun discussing a third, broader and harsher batch of sanctions, a prospect the Islamic Republic has shrugged off.

But the International Atomic Energy Agency director says the standoff could erupt into US-Iranian war inflaming the Middle East down the road unless a face-saving compromise is found, and made an urgent appeal this month for ''creative diplomacy''.

Building on a suggestion from IAEA chief Mohamed ElBaradei, the six powers are reviewing a draft proposal under which Iran would stop building up its enrichment capacity if they held off on pursuing new sanctions, a senior European diplomat said.

''This would be a kind of preliminary of getting into negotiations for which suspension would still be required. In effect, this would be a 'pause in the fighting' while people try to negotiate a 'ceasefire','' he told Reuters.

''The objective of the ceasefire, that is, the suspension, is to get into 'peace' negotiations,'' he said, referring to a process of implementing trade incentives offered by the six powers to Iran more than a year ago.

''So what we are talking about here is not a withdrawal of the demand of suspension, it is that we are being creative in working for further steps in the direction of suspension.

''TIME-LIMITED PERIOD'' ''What we are proposing here,'' he said, ''is a stop to further escalation, but for a time-limited period while we would try to find a way to begin (full) negotiations.'' Newsweek magazine, which first reported the proposal early today, said it was drafted by Britain.

Asked about this, a British Foreign Office official said: ''The next steps are under discussion but our policy remains as it has always been. There is no flexibility (on) the requirement that Iran has to suspend enrichment before talks can commence.'' There was no immediate comment from Iran, whose Islamist leaders have defiantly ruled out any kind of nuclear pause.

On behalf of the six powers, EU foreign policy chief Javier Solana has been exploring ways towards a suspension in periodic talks with Iran. The next meeting is expected in mid-July.

Diplomats have said Russia, China and Germany would be amenable to capping Iran's enrichment programme where it is, still well short of the ''industrial scale'' that could produce enough material for a bomb, if it wanted one.

But the United States, France and Britain have been sceptical or dismissive out of concern Iran could still perfect enrichment technology with bomb potential if allowed to continue spinning centrifuges, they said.

US Secretary of State Condoleezza Rice said last week that ''people are looking, obviously, for ways that Iran might be able to suspend, but suspension remains the core of the effort.'' Faced with stiffer sanctions, Iran has shifted slightly. It has invited the IAEA to send in a team to agree within 60 days how to resolve agency questions about the nature of its nuclear programme -- another demand of the Security Council.

A breakthrough towards Iranian nuclear transparency could build support for an enrichment compromise, especially as Russia has indicated it will not back more sanctions unless the IAEA declares all its investigative possibilities exhausted.

Reuters AM GC2205