DAVOS, Switzerland (Reuters) - Iran and the U.N. nuclear agency said on Friday a deal on enriched uranium was still possible, but there was no sign Tehran would accept Western terms meant to prevent the material being used in bombs.
Western diplomats have said Iran has effectively turned down the proposal and the United States and major European allies are pursuing broader U.N. sanctions against the Islamic Republic over its disputed nuclear activity.
Iranian Foreign Minister Manouchehr Mottaki told Reuters the proposal, which would involve Iran sending its enriched uranium abroad in exchange for fuel to produce medical isotopes, "still can be on the table."
There was potential for "some common understanding first, and agreement second," he said. "There is a possibility."
He was speaking at the World Economic Forum in Davos, shortly after Yukiya Amano, head of the International Atomic Energy Agency which brokered the draft deal on enriched uranium, told reporters in the Swiss ski resort that the offer remained.
"The proposal is on the table. Dialogue is continuing," Amano said in his first public remarks on the standoff since he succeeded Mohamed ElBaradei two months ago.
He left unclear whether "dialogue" meant the IAEA was actively exploring compromises with Iran and world powers. Western officials have stopped short of declaring the plan dead but said Tehran's approach had not been serious.
Diplomats said last week Iran's envoy to the IAEA had notified Amano that it could not accept the deal's central provision for Tehran to ship most of its enriched uranium abroad in one go in exchange for fuel for nuclear medicine.
This followed months of dismissive or ambiguous remarks by Iranian officials made through the media. The United States quickly dismissed Tehran's reply as "inadequate."
Western powers fear Iran's nuclear program could be used to build atomic bombs. Iran says it is a peaceful project for power generation, but Amano said 20 years of undeclared Iranian nuclear work had undermined international trust.
IAEA inspection work in Iran is restricted and Amano said the agency was struggling to maintain oversight.
"Comprehensive safeguards should be fully implemented. That is what we are struggling (with) now," he told a panel on nuclear proliferation in Davos.
"I hope agreement will be reached (on the fuel plan) and I continue to work as intermediary. This will ... help increase confidence," Amano said.
Brazil's Foreign Minister Celso Amorim said he had held talks in Davos with Mottaki and Western officials in an effort to restart dialogue over the nuclear dispute.
Russia and China have also called for more negotiations, opposing further sanctions which they believe may hinder a peaceful solution, though Moscow on Friday showed signs of impatience. Neither sees Iran as an imminent nuclear threat.
Under the draft plan, Tehran would transfer 70 percent of its low-enriched uranium (LEU) to Russia for further processing and then to France for conversion into special fuel rods to keep a Tehran nuclear medicine reactor running.
The arrangement, which envisaged Iran getting the fuel about a year after parting with the LEU, aimed to cut its LEU reserve below the quantity needed for the fissile core of a nuclear weapon, if the material were refined to a high degree of purity.
Western negotiators said Iran accepted the scheme in principle at Geneva talks with six world powers in October, only to back off after ElBaradei fleshed out details.
Iranian officials have subsequently demanded amendments which would entail swapping its LEU for reactor fuel only in small, phased amounts and only on Iranian soil -- to avoid a significant reduction in the LEU stockpile.
In a sign of growing frustration, Russia's foreign ministry warned that Tehran's plans could obstruct a deal.
"The decision to start its own uranium enrichment, which runs counter to the requirements of relevant resolutions of both the U.N. Security Council and the IAEA Board of Governors, will only fan the existing concerns and obstruct the early settlement of the situation," spokesman Andrei Nesterenko said.
Writing by Mark Heinrich; Additional reporting by Clara Ferreira Marques in Davos and Conor Sweeney in Moscow; Editing by Mark Trevelyan