By Madeline Chambers
LONDON (Reuters) - World powers made progress but failed to reach consensus in talks on Wednesday on a package of incentives and threats to prevent Iran from being able to build a nuclear bomb.
Senior officials from U.N. Security Council permanent members China, Russia, the United States, France and Britain, plus Germany had met to try to narrow divisions over how to induce Tehran to halt sensitive uranium enrichment work.
Washington also said Iran, which insists on its right to a full range of nuclear technology, had sought bilateral talks with the United States, but the administration was committed to a multilateral approach.
"What I've heard is that there has been great progress," said a State Department spokesman about Wednesday's meeting, adding, however, that a deal was "not done yet".
As preparatory work continues in coming days, officials will propose that foreign ministers should meet soon to take final decisions, said a spokesman for Britain's Foreign Office.
"This is a complex and sensitive diplomatic negotiation," he said, declining to be drawn on details of the talks.
Washington and some of its Western allies suspect Iran's professed bid for nuclear power for its economy is a cover for efforts to develop an atomic bomb.
As the talks took place, London's International Institute of Strategic Studies (IISS) said there was a growing international consensus that Iran will almost inevitably develop nuclear arms.
Director-General John Chipman said the IISS still believed 2010 was the earliest Iran could produce enough uranium for a bomb, but 2008 and 2009 were "within the margin of error".
Serious differences have persisted between Washington and Moscow over U.S. demands that Iran face sanctions, resisted by Russia, if it continues to defy the international community.
IRAN DEFIANT
The Islamic Republic says it is developing nuclear technology for civilian energy generation and Iran's President Mahmoud Ahmadinejad issued a defiant message on Wednesday.
"Using nuclear energy is Iran's right," Ahmadinejad told a rally in a speech broadcast live on state television.
U.N. Secretary-General Kofi Annan, speaking during a visit to Vietnam, said he had appealed to Iran "not to reject anything out of hand" that might emerge from the London talks.
The final package is likely to include an offer of a light-water reactor and a supply from abroad of fuel for civilian atomic plants so Iran would not have to enrich uranium.
Enriched to a low level, uranium is used as nuclear power plant fuel. But if purified to a higher grade, uranium can set off the chain reaction that detonates atomic bombs.
The EU package will also warn of possible sanctions if Iran, the world's fourth-biggest oil producer, refuses the offer.
Diplomats say they would discuss targeted sanctions, such as visa bans on Iranian officials involved in the nuclear programme, before seeking ways of curtailing trade deals.
At a separate meeting in Washington, Mohamed ElBaradei, head of the U.N. nuclear watchdog agency the International Atomic Energy Agency (IAEA), said he discussed Iran's views with Secretary of State Condoleezza Rice after talks with Tehran's negotiator, Ali Larijani.
"Of course I briefed Secretary Rice on the Iranian point of view, but it's rather different from the U.S point of view," he said.
ElBaradei also told reporters it was up to the United States to decide whether it would take part in direct talks with Iran.
Some EU officials, many analysts and the IAEA, say efforts to end the crisis could be boosted if Washington began talking to Iran after 26 years of official silence.
They believe one way to entice Iran back to good-faith negotiations and stop it seeking sensitive atomic know-how would be a U.S. pledge not to try to topple Tehran's government, which the Bush administration has labelled ripe for "regime change".
Tehran cites a right to civilian atomic research under the nuclear Non-Proliferation Treaty, which allows it enrich uranium for peaceful purposes, and calls it non-negotiable.
