Iran nuclear talks to drag on past deadline as U.S. threatens to walk away

LAUSANNE, Switzerland (Reuters) - The United States said on Tuesday that world powers and Iran would keep negotiating over an outline accord on Tehran's nuclear programme beyond a midnight deadline, while warning that it was ready to abandon the talks altogether.

As Iran affirmed its "nuclear rights", the talks in the Swiss city of Lausanne appeared to be bogged down, while officials cautioned that any agreement would probably be fragile and incomplete.

Two Western diplomatic sources said the Iranians had been told by the powers that they must make up their minds on whether to accept a political agreement before dawn on Wednesday.

"We have told them that this has to be decided now," a source said. "It can't carry on for six more days."

The U.S. State Department said the efforts for a deal would go on past the self-imposed deadline of March 31. "We've made enough progress in the last days to merit staying until Wednesday," acting spokeswoman Marie Harf said in a statement. "There are several difficult issues still remaining."?

For nearly a week, the United States, Britain, France, Germany, Russia and China have been trying to break an impasse in the talks, which are aimed at stopping Iran from gaining the capacity to develop a nuclear bomb in exchange for easing international sanctions that are crippling its economy.

The outline political accord is supposed to lay the foundations for a final settlement of the long-running nuclear dispute by June 30 - another self-imposed deadline, but one that Western powers have made clear they do not want to extend.

A senior Iranian negotiator said Tehran was willing to continue talks until the deadlock is resolved. "Iran does not want a nuclear deal just for the sake of having a deal, and a final deal should guarantee the Iranian nation's nuclear rights," the negotiator, Hamid Baidinejad, told reporters.

White House spokesman Josh Earnest said in Washington that U.S. negotiators will not wait until June 30 to walk away from the talks if they cannot reach a preliminary political agreement.

"If we're not able to reach a political agreement, then we're not going to wait ... until June 30 to walk away," he said.

"We are moving forward, but it's complicated," French Foreign Minister Laurent Fabius told reporters in Lausanne.

A German delegation source said "it remains an open question whether we will succeed", adding that it was "too early to think about stopping the clock, (though that) may perhaps prove necessary".

TWO SCENARIOS

Disagreements on enrichment research and the pace of lifting sanctions threatened to scupper a deal that could end the 12-year standoff and reduce the risk of another Middle East war. Iran says its nuclear programme is peaceful.

For days officials have been trying to agree on a brief document of several pages outlining headline numbers to form the basis of a future agreement.

It is possible they would not agree on anything. "We are preparing for both scenarios," another Western diplomat said.

Speaking in Berlin with German Chancellor Angela Merkel, French President Francois Hollande said it would be better to have no deal than a bad deal.

An agreement would almost certainly lift sanctions only in stages, deferring even a partial return of Iranian crude exports until at least 2016.

Sanctions have halved Iran's oil exports to just over 1 million barrels per day since 2012 when oil and financial sanctions hit Iran. Brent crude dropped towards $55 a barrel on Tuesday as negotiations continued. [O/R]

STICKING POINTS

Officials from both sides said the main sticking points were the removal of the U.N. sanctions and Iranian demands for the right to unfettered research and development into advanced nuclear centrifuges after the first 10 years of the agreement expires.

The six powers want more than a 10-year suspension of Iran's most sensitive nuclear work. Their goal is to find a way to ensure that for at least the next 10 years Iran is at least one year away from being able to produce enough fissile material for an atomic weapon.

Iran said the main issue was lifting sanctions quickly. "There will be no agreement if the sanctions issue cannot be resolved," Majid Takhteravanchi, an Iranian negotiator, told Iran's Fars news agency.

Russian Foreign Minister Sergei Lavrov said he believed there was a good chance of success "if none of the parties raise the stakes at the last minute".

Both Iran and the six have floated compromise proposals, but Western officials said Tehran has backed away from proposals it previously indicated it could accept, such as on shipping enriched uranium stocks to Russia.

The U.S. Congress has warned it will consider imposing new sanctions on Iran if there is no agreement this week, giving a sense of urgency to the talks.

U.S. President Barack Obama has threatened to veto any sanctions moves by the Republican-dominated Congress.

In Jerusalem, Prime Minister Benjamin Netanyahu reiterated Israel's concern that an agreement would fall short of guaranteeing its safety.

The framework agreement would leave Iran with the capability to develop a nuclear weapon in under a year, said Netanyahu, whose country is believed to have the Middle East's only nuclear arsenal.

(Additional reporting by Stephanie Nebehay in Lausanne, Thomas Grove in Moscow, Noah Barkin in Berlin, Dan Williams in Jerusalem and Julia Edward in Washington; Editing by David Stamp and Alison Williams)

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