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By Louis Charbonneau
UNITED NATIONS (Reuters) - Iran has told the U.N. nuclear watchdog it wants fresh fuel for a reactor in Tehran before it will agree to ship most of its enriched uranium stocks to Russia and France, diplomats said Friday.
In what the International Atomic Energy Agency has described as an initial response to an IAEA-drafted nuclear fuel proposal, Western diplomats said on condition of anonymity that major Western powers found the Iranian demand for immediate access to fresh atomic fuel unacceptable.
Tehran insists its nuclear program is peaceful and has refused to halt it, while Western powers fear Iran is covertly developing atomic weapons.
"The Iranians want to get enriched uranium fuel for their reactor first before they send it abroad, which simply isn't acceptable," one diplomat told Reuters.
Another diplomat confirmed the remarks as accurate.
The diplomats said it was unclear whether the proposal was a serious one or if the Iranians were trying to drag out the negotiating process.
"There is some impatience. How many days we have here is not clear but Iran must soon show it will work with the proposal that is on the table," a Western official in Washington told Reuters.
"We will know probably by early next week -- are they serious, are they coming back with things that are within bounds or are they sticking to a position that is unacceptable?"
The press office of Iran's U.N. mission was not immediately available for comment. Nor was Iran's IAEA envoy in Vienna.
IAEA chief Mohamed ElBaradei, who is in New York for a series of meetings at U.N. headquarters, also declined to comment when asked by Reuters about Tehran's response.
The IAEA proposal calls for Iran to transfer about 75 percent of its known 1.5 metric tons of low-enriched uranium to Russia for further enrichment by the end of this year, then to France for conversion into fuel plates for a reactor in Tehran that produces radio isotopes for cancer treatment.
"Any proposal that moves away from this is unacceptable," the Western official in Washington told Reuters.
"We are prepared to allow ElBaradei to work to try to get this proposal that was agreed upon in Vienna ... to be pushed forward in terms of implementation. However, this is not an endless process."
The Obama administration has said it favours talks with Iran rather than the more unpalatable alternatives of sanctions or military action, but White House spokesman Robert Gibbs said on Friday that President Barack Obama's "time is not unlimited."
"This was not about talking for the sake of talking. This was about reaching an agreement that just a few weeks ago seemed to be something that the Iranians wanted," Gibbs said.
U.N. Secretary-General Ban Ki-moon urged Tehran earlier this week to accept the IAEA proposal, saying it would "constitute an important confidence-building measure."
EU leaders urged Iran to accept the IAEA deal, saying progress would help open the door to further cooperation.
NO FORMAL RESPONSE FROM IRAN
Diplomats said Iran has yet to give a formal response to the U.N.-drafted nuclear fuel proposal after signalling it would do so this week but has leaked other demands for major changes that could unravel the tentative pact.
Western diplomats complained Iran had shown scant interest in following through on a plan they saw as crucial to demonstrating Tehran's nuclear ambitions are peaceful.
Iran's official IRNA news agency said Friday that Tehran had not yet given its final response and was ready for more talks. The report suggested Iran would remain evasive.
"Even if a next round of talks was held, Iran would announce its opinion and not an answer," IRNA quoted one source as saying.
French Foreign Ministry spokesman Bernard Valero said Iran appeared to have given only a verbal indication of its position and proposed changes, which he did not specify.
In addition to the demand for fresh nuclear fuel up front, Iranian media reported that Tehran wants the low-enriched uranium to be shipped out in small, staggered portions -- not all in one go as the draft text stipulates.
This would undo key aspects of the deal for big powers, who want to minimize Iran's potential to build atomic bombs from its growing stockpile of low-enriched uranium.
They have warned Iran it risks a fourth round of U.N. sanctions if it fails to help defuse concerns about its nuclear program. Iran insists the work is for the peaceful generation of electricity.
Western powers withheld substantive comment on Iran's demands for amendments to the pact.
U.S. Secretary of State Hillary Clinton signalled Friday the United States would allow talks with Iran to play out before considering fresh sanctions.
Iran's clerical establishment agreed to talks with world powers after a disputed presidential election in June and its turbulent aftermath, which harmed the legitimacy of the country's leadership.
Some hardliners have criticized the establishment for succumbing to international pressure to accept the deal, which could prove a test of U.S. President Barack Obama's diplomatic outreach and his push for nuclear disarmament worldwide.
(Additional reporting by Mark Heinrich in London, Sylvia Westall in Vienna, James Mackenzie in Paris, Will Dunham and Ross Colvin in Washington and David Brunnstrom in Brussels; Editing by Andrew Dobbie and John O'Callaghan)

Reuters