Iran not interested in nuclear fuel swap: atomic chief

DUBAI (Reuters) - Iran has no interest in reviving a failed nuclear fuel swap deal with Western powers, but might scale back production of higher-grade enriched uranium once it has the material it needs, the head of the country's atomic energy organization said.

U.S. officials say that getting Iran to suspend high-level uranium enrichment and close an underground nuclear facility near the holy city of Qom are priorities for talks between Iran and world powers that are due to resume on Saturday.

Iranian media also quoted Foreign Minister Ali Akbar Salehi on Monday as saying that Tehran would not agree to world powers imposing pre-conditions before the nuclear talks which will resume in Istanbul after collapsing more than a year ago.

"Setting conditions before the meeting means drawing conclusions, which is completely meaningless and none of the parties will accept conditions set before the talks," the Iranian parliamentary news agency quoted him as saying.

The United States and its allies suspect Iran's nuclear program is hiding attempts to develop an atomic weapons capability and Washington has not ruled out military action against Tehran if diplomacy fails.

Iran says the program is solely for power generation and medical needs, adding that it needs to enrich uranium to 20 percent to produce medical isotopes from a Tehran research reactor for the treatment of thousands of patients.

Iranian media on Monday quoted nuclear chief Fereydoon Abbasi-Davani as dismissing a revival of the swap deal to supply Iran with fuel enriched abroad for peaceful purposes at the Tehran research reactor but which collapsed in 2009.

"The Islamic Republic won't turn back and has no interest in receiving 20 percent fuel from other countries because it has made an investment," Abbasi-Davani said during a Sunday night television interview, the Iranian state news agency reported.

However, Abbasi-Davani raised the possibility of converting fuel back to 3.5 percent purity, the level of enrichment required for reactors producing nuclear power.

"Once the necessary fuel is obtained, we will scale back production and maybe even convert it to 3.5 percent," he said.

URANIUM ENRICHMENT

Trying to find a way to halt Iran's higher-grade uranium enrichment capability has become the focus for Washington and its allies and the suggestion leaves questions over what would happen to Iran's stockpile of uranium enriched to 20 percent.

Iranian scientists began enriching uranium to 20 percent purity in early 2010 and now say they can produce the fuel plates required to feed the Tehran research reactor. Iran has repeatedly said it had no other choice after the 2009 swap deal failed to secure uranium to keep the reactor running.

Analysts say the negotiations depend on the extent of Iran's ability to make compatible fuel plates. Western experts have doubts about Tehran's announcements and suggest a revised fuel swap may still figure in the talks as a way to break to the deadlock.

It is unclear what it would expect in return, but its demands would undoubtedly revolve around the lifting of sanctions against its financial and energy industries which have caused increasing financial hardship within the country.

On Sunday, Israeli defense minister Ehud Barak emphasized that the talks could be successful if Iran halted enrichment to 20 percent.

Later Israeli Prime Minister Benjamin Netanyahu went further, saying the P5+1 representatives to the talks should demand an end to all enrichment activity at all levels.

While Iran has at times appeared more flexible regarding 20 percent enrichment, it has categorically refused to suspend its low enriched uranium activities.

Crude oil prices slipped on Monday following news that the talks would resume between Iran and the P5+1 countries - the United States, Britain, France, Russia, China and Germany. Brent crude futures were $1 a barrel lower.

Iran's Supreme National Security Council confirmed a second round of talks would be held in Baghdad, Fars news agency reported.

(Editing by David Stamp)

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