Iran and world powers on Monday locked horns in Moscow for a new round of high-stakes talks on the controversial Iranian nuclear programme seen as a last chance to prevent a breakdown of the process.

Chief Iranian nuclear negotiator Saeed Jalili sat down with representatives from six world powers including Tehran's arch foe the United States for two days of talks which will show if there is any hope of progress in resolving the standoff.

With an initial show of protocol smiles and polite cordiality, Jalili and the Iranian negotiating team sat at one side of the table opposite the envoys of the six world powers and EU foreign policy chief Catherine Ashton.

Failure in the talks could carry a heavy cost with the United States and its ally Israel refusing to rule out the option of airstrikes against the Iranian nuclear programme and Tehran facing sanctions that could cripple the economy.

But Iran made clear ahead of the negotiations it has no intention of abandoning its right to enrich uranium, the process which can be used to make nuclear fuel but also the explosive core of an atomic bomb.

"If this demand isn't recognised, the negotiations are certainly headed for failure," an unidentified Iranian official at the talks said, according to state news agency IRNA.

Russia's Kommersant daily said Iran would be offered a compromise plan under which it would scale down the degree to which uranium is enriched at its main enrichment facility in Natanz from 20 percent to 3.5 or 5 percent.

The proposal would also require Iran to freeze all enrichment at its underground Fordo facility deep in the mountains outside the holy city of Qom or even close the plant altogether, Kommersant said, quoting diplomatic sources.

The West accuses Iran of seeking an atomic bomb under the guise of a civilian nuclear energy programme, a charge vehemently denied by Tehran. Host Russia has long taken a more cautious line, saying Iran must restore confidence but not explicitly accusing it of military intentions.

The urgency for Iran is compounded by the July 1 deadline the European Union has slapped on a full oil embargo against Tehran and the June 28 rollout of tough US sanctions against a host of countries that buy Iranian oil.

"This meeting is going to be decisive. (If the talks fail) a toughening of sanctions against Tehran will be unavoidable and the use of military force very real," said Kommersant.

In a hint of compromise, President Mahmoud Ahmadinejad said Iran is ready to suspend its controversial enrichment of uranium to 20 percent if Europe guarantees delivery of nuclear fuel for its reactors.

"The Islamic Republic of Iran has always said that, if the European countries give Iran 20 percent (enriched uranium) fuel, Iran will not carry out enrichment to that level," he was quoted as saying on his website.

An Iranian diplomat at the talks promised that Iran "will discuss seriously the topics raised" by the world powers -- Britain, China, France, Russia and the United States, plus Germany -- in Moscow.

"We are hoping the 5+1 (world powers) commit to the obligation of serious talks," the diplomat added.

The talks follow a bruising session in Baghdad in May that failed to make any noticeable progress beyond agreeing a date for more talks, an outcome that may not be acceptable again for the West.

A Western diplomatic source, who asked not to be named, warned that "Iran should come prepared to negotiate seriously" at the talks and consider the proposals put forward by world powers.

"If Iran remains unwilling to take the opportunities these talks present, it will face continuing and intensified pressure and isolation," added the source.

Iran's nuclear programme: some thorny issues
Moscow (AFP) June 18, 2012 - Iran begins a two-day meeting on Monday with the P5+1 powers -- the United States, China, Russia, Britain, France plus Germany -- to seek progress in their long-running dispute over Tehran's nuclear programme. A short summary of the main issues:

- IRAN AND THE BOMB: Iran says its nuclear programme, expanded dramatically in recent years, is peaceful. Much of the international community suspect it wants atomic weapons. The UN Security Council has imposed four rounds of sanctions. Additional US and EU measures targeting Iranian oil exports have been imposed and are due to be expanded significantly on June 28 and July 1 respectively.

Israel, the Middle East's sole if undeclared nuclear power, has, like Washington, not ruled out military action. Regional tensions are running high, keeping oil prices higher than they otherwise would be, given the struggling global economy.

- NON-PROLIFERATION: As a 1968 signatory of the nuclear Non-Proliferation Treaty (NPT), Iran says it has the right to a peaceful nuclear programme. However the treaty also stipulates Iran has to submit to inspections by the UN nuclear watchdog, the International Atomic Energy Agency, to determine that no materials or sites are being used for other purposes.

The IAEA, while conducting regular inspections of Iran's declared nuclear facilities, says that a lack of Iranian cooperation means it is unable to guarantee that this is the case.

- URANIUM ENRICHMENT: The trickiest part of making a nuclear weapon is creating the fissile core, either uranium or plutonium. Iran has for some time been enriching uranium to the 3-5 percent purities needed for power generation. But in 2010, it began processing to 20 percent, ostensibly to produce medical isotopes, and since January it had done so at the Fordo site in a mountain near the holy city of Qom.

This takes Iran significantly closer to weapons-grade of 90 percent and reduces the "breakout" time needed to make a bomb -- if it decides to eject IAEA inspectors and do so.

- MILITARY DIMENSIONS: A major IAEA report in November 2011 reflected Western suspicions that, at least to 2003 and possibly since, Iran has been conducting research into how to actually make a nuclear bomb. Iran rejected the report, saying its information is based on forgeries.

The IAEA says Iran is refusing it access to the Parchin military site where some of this work allegedly took place and Western countries have accused Iran of removing evidence there. Talks on resolving the impasse between Iran and the IAEA faltered earlier this month.

- DIPLOMATIC PUSH: Iran and the P5+1 returned to talks in Istanbul in mid-April after a 15-month hiatus, and determined each side was serious enough to meet again in Baghdad on May 23-24. There, the P5+1 proposed that Iran abandon 20-percent enrichment, shut down Fordo and ship uranium stockpiles abroad.

But for Tehran the concessions offered -- nuclear cooperation, spare parts for aircraft, and an easing of an EU ban on tanker insurance that hinders oil sales to Asia -- were insufficient. It countered with a list of its own issues that included several non-nuclear topics. The Baghdad round came close to collapsing but the parties agreed to come to Moscow.

- THE RIGHT TO ENRICH: Iran wants the P5+1 to acknowledge it has a "right" to enrich uranium, something which is not explicitly spelled out in the NPT. UN Security Council resolutions call on Iran to suspend all enrichment, not just to 20-percent purities, and world powers will be loath to drop this until they are fully satisfied Iran is not working on the bomb -- a process that could take years.

Critics in the United States, where President Barack Obama faces a tough election battle in November, Israel and elsewhere complain that a deal involving only a halt to 20-percent enrichment would be an implicit and dangerously premature recognition of Iran's right to enrich to lower levels.