Iran must reduce nuclear fuel capacity to secure deal - Kerry

VIENNA (Reuters) - U.S. Secretary of State John Kerry said on Tuesday Tehran must reduce its capacity to make nuclear fuel if it wants to secure a long-term deal with six world powers that would bring an end to sanctions that have crippled the Iranian economy.

"We have made it crystal clear that the 19,000 (centrifuges) that are currently part of their programme is too many," Kerry told reporters after three days of talks with Iranian Foreign Minister Mohammad Javad Zarif.

In a New York Times interview, Zarif floated the idea of Tehran keeping its enrichment programme at current levels for a few years before expanding it.

Kerry was responding to a question about a major speech by Iran's Supreme Leader, which diplomats said has limited the ability of the Iranian delegation to make concessions with the six powers and could make it difficult for Tehran to reach a deal, diplomats close to the talks said.

Zarif's proposal is consistent with Iranian Supreme Leader Ayatollah Ali Khamenei's speech from last week on Iran's long-term nuclear demands and is an idea the Iranian delegation raised in recent weeks with the United States, Britain, France, Germany, Russia and China, diplomats said.

"There has been tangible progress on key issues," Kerry said, without going into detail. "However there are also very real gaps.

"It is clear we still have more work to do and our team will continue to work very hard to try to reach a comprehensive agreement that resolves the international community's concern," Kerry said.

"We have not yet found the right combination or arrived at the workable formula," he said. "There are more issues to work through and more provisions to nail down to ensure that Iran's (nuclear) programme can always remain exclusively peaceful."

Kerry said he had held several extensive conversations with Zarif since arriving early on Sunday. He had a final short meeting with Zarif at the Palais Coburg before heading to the airport to return to Washington, a senior State Department official said.

TALKS EXTENSION?

With a self-imposed July 20 deadline five days away, Iran and the six are trying to bridge major differences in negotiating positions over a deal intended to end a decade-long dispute over a nuclear programme which Tehran says is peaceful.

The West fears Tehran's nuclear activities may be aimed at developing a nuclear weapons capability.

"I am returning to Washington today to consult with President (Barack) Obama and leaders in Congress over the coming days about our prospects for a comprehensive agreement, as well as a path forward if we do not achieve on July 20, including whether or not more time is needed based on the progress we've made," he said.

One option is to extend the talks for up to six months, which is theoretically possible according to an interim agreement Iran and the powers signed in November and began implementing in January. The interim deal gave Iran limited sanctions relief in exchange for curbing some atomic work.

A senior U.S. official said on Saturday that an extension would be difficult to consider without first seeing "significant progress on key issues".

It was not immediately clear if the progress Kerry spoke of on Tuesday was enough to justify an extension.

Earlier this week, a senior U.S. official said Iran was sticking to "unworkable and inadequate" positions during the closed-door negotiations, which began in February.

Zarif said on Tuesday that he had held good talks with Kerry, though he said "Washington needs to take a political decision... to end the deadlock." He did not offer any detail.

A member of the Iranian delegation was quoted as saying that it was the six powers who had caused the deadlock, not Iran.

"We can reach an agreement if the other party stops having excessive demands and denying the facts," the unnamed Iranian delegate told Iran's IRNA state news agency.

A history of hiding sensitive nuclear work from U.N. inspectors has kept international suspicions about Iran's nuclear programme high and heightened the risk of a new Middle East war should diplomacy fail to yield a long-term settlement.

Back in Washington two influential U.S. senators have asked fellow lawmakers to support demands that Iran accept tough conditions in nuclear talks, including at least two decades of inspections, before Congress would agree to ease sanctions.

In the New York Times interview, Zarif said any limits on Iran's nuclear programme should be lifted after three to seven years. But U.S. officials have said Washington would want verifiable limits to remain in place for more than a decade.

One Western diplomat said on condition of anonymity that Zarif's proposals appeared to be a "strategic and calculated move" to secure an extension for the talks.

(Reporting By Louis Charbonneau, Lesley Wroughton, Fredrik Dahl and Parisa Hafezi; editing by Ralph Boulton)