VIENNA - Talks between Iran and world powers on a deal to allay concerns about Tehran's nuclear drive started well on Monday, the U.N. atomic agency chief said, despite Iran's reported refusal to negotiate with France.

The meeting hosted by the IAEA offered the first chance to build on proposals raised at high-level Geneva talks on October 1 to defuse a standoff over suspicions Iran's uranium enrichment programme is covertly intended to develop nuclear weapons.

Iran agreed then to U.N. inspections at a hitherto hidden nuclear site, and in principle to sending low-enriched uranium abroad for processing into fuel for a Tehran reactor producing medical isotopes.

The West hopes the step will minimize the risk of Iran refining the material to high purity suitable for bombs.

We're off to a good start. We have had a constructive meeting. Most technical issues have been discussed. We will continue the meeting at 10 a.m. tomorrow, Mohamed ElBaradei told reporters in Vienna on Monday.

Ali Asghar Soltanieh, Iran's envoy to the International Atomic Energy Agency, endorsed ElBaradei's remarks, saying he was speaking on Tehran's behalf. He refused further comment.

The meeting of Iranian, Russian, French and U.S. officials started in Vienna shortly after state-run Iranian television said Tehran would not deal directly with France since it had failed to deliver nuclear materials in the past.

But a senior Western diplomat familiar with the talks said Iranian envoys engaged with all other delegations in the room on Monday and there were no grounds to put out a gloom and doom message about the gathering.

Everyone at the table was making their points and listening to one another. It's too early to tell the outcome. But there is nothing to prevent the talks ultimately moving forward.

But Iran, which says it is enriching uranium only for electricity uses, struck a defiant tone before the meeting.

IRANIAN WARNING

Nuclear energy agency spokesman Ali Shirzadian said it was not economically feasible for Iran to purify further low enriched uranium (LEU) itself to yield the 150-300 kg of material that it needs for the reactor, but it would do so if the Vienna talks do not bring about Iran's desired result.

The Islamic Republic won a reprieve from harsher U.N. sanctions with its gestures of cooperation in Geneva.

But Iran sent only a lower-level technical delegation to the Vienna talks headed by its IAEA ambassador, not its nuclear energy agency chief, indicating Tehran may not be ready for a final agreement this week as the six powers want.

Tehran has also denied Western accounts that it had tentatively agreed to major aspects of the proposal in Geneva.

Western diplomats said Iran had signaled in Geneva that it was ready to ship about three-quarters of its known stockpile of 5-percent-enriched uranium to Russia for refinement to 19.7 percent purity, then to France for fabrication into fuel rods.
The material would be resistant to higher enrichment. Low enriched uranium is used to run civilian nuclear power stations.

This arrangement would buy time for big power diplomats to negotiate farther-reaching measures, such as a freeze on Iranian enrichment growth and unfettered IAEA inspections in exchange for trade incentives on offer to Iran since 2006.

The talks this week are supposed to seal the deal, said the Western diplomat. But, since we have had no negotiations thus far with the Iranians, the next couple of days could reopen a lot of what we hoped was already agreed in principle.

Iran's LEU reserve has no apparent civilian use since Iran has no operating nuclear power plants, but is now enough to fuel one atomic bomb, if Tehran chose to enrich it to weapons-grade.

Shirzadian told the official IRNA news agency that providing fuel for the Tehran reactor was a good test to see whether the West is honest with Iran. He said Iran's programme to produce 5-percent LEU would continue, whatever the outcome.

We will never abandon our right (to enrich), he said.

Diplomats say Tehran must ultimately curb the enrichment programme to dispel fears of a constantly growing LEU stockpile being enriched to 90 percent purity for atomic bomb fuel.

Iran is under IAEA and world power pressure for nuclear restraint and transparency because of its past record of cover-ups and continued restrictions on U.N. inspector access.

(Additional reporting by Parisa Hafezi in Tehran and Sylvia Westall in Vienna; Editing by Jon Boyle)

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