Iran impasse to stir sanctions pressure, tensions

By Justyna Pawlak and William Maclean

MOSCOW/LONDON (Reuters) - Western diplomatic efforts to curb Iran's nuclear program may not have breathed their last but the troubled process appears to be on life support after talks this week failed to resolve a row stirring regional tensions and unsettling oil markets.

Mindful of a possible Israel strike, both Iran and its negotiating partners are keen to pursue even a minimal level of contact to shore up the process despite the failure of the negotiations in Moscow on Monday and Tuesday.

A technical discussion is scheduled for July 3 in Istanbul, but no further political talks have been agreed. The West, suspicious Tehran is working towards a nuclear bomb, is due to introduce hard-hitting trade sanctions in the two weeks before that.

"Diplomacy in now on a respirator," said Cliff Kupchan of the Eurasia Group consultancy. "Both sides underestimated the difficulty of moving talks forward. How little progress was made underlines how far apart the sides are on substance."

U.S.-based Iran expert Trita Parsi said if a compromise was not vigorously pursued, "war will become far more likely."

"It really does seem like the Iranians just haven't made the decision to accept limits on their nuclear program," a Western diplomat said.

"If they haven't made that decision then all the talking in the world really isn't going to get us anywhere."

"Iran really pressed for this experts meeting and Russia wanted it so we agreed to do it. It doesn't feel to us like there is a lot of progress that is going to be made even there.