Iran and world powers on Monday failed to move any closer to a breakthrough in the standoff over the Iranian nuclear programme at talks in Moscow seen as a last chance to solve the crisis diplomatically.

During several hours of tense talks at a hotel in the Russian capital, the West probed for signs that Iran could show willingness to scale down the intensity of its sensitive uranium enrichment activities.

But the Islamic republic appeared to have stuck rigidly to its refusal to give major concessions on its right to uranium enrichment, a process that can be used to make nuclear fuel but also the core of an atomic bomb.

"The main stumbling block is the fact the positions of the sides are rather complicated and hard to reconcile," the Interfax news agency quoted Deputy Foreign Minister Sergei Ryabkov as saying.

"How to bring these positions together is possibly the main difficulty."

A member of the Iranian delegation, who asked not to be named, gave a downbeat assessment. "So far the atmosphere is not positive," he said, adding: "Setting up the framework (for negotiation) is the main problem."

Chief Iranian nuclear negotiator Saeed Jalili was meeting with envoys from six world powers including Tehran's arch-foe the United States as well as EU foreign policy chief Catherine Ashton for two days of talks.

The world powers are the so-called "P5+1" -- Britain, China, France, Russia and the United States, plus Germany.

With the talks clearly not smooth, rumours swirled in the afternoon that the sides might not even turn up for a second day but officials later confirmed that the negotiations would continue as planned on Tuesday.

Jalili had gone into the talks in uncompromising mood, telling Iranian state television: "These negotiations are a big test to see if the West is in favour of Iran's progress or against."

The EU delegation spokesman told reporters that world powers were sticking by a previous demand for Iran to halt enriching uranium to 20 percent -- a level approaching that needed to make an atomic bomb.

The deputy head of the Iranian national security council, Ali Bagheri, told reporters that the talks were "very serious and constructive" and said Ashton had promised to respond to Iranian proposals at Tuesday's talks.

"We have promised to examine eachother's positions. A lot depends on the reflections that we have overnight," said the spokesman of the EU delegation.

Failure of the talks could have heavy repercussions, 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.

Without referring specifically to the talks, Iran's Supreme Leader Ayatollah Ali Khamenei said: "The enemy must know that arrogance and misplaced expectations will lead nowhere against a people who have learned the resistance of the Koran."

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 5.0 percent.

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 that Iran must restore confidence but not explicitly accusing it of military intentions.

The urgency for Iran is compounded by a July 1 European Union deadline for Tehran to avert a full oil embargo 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," Kommersant said.

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 to the West if repeated in Moscow.