By Fredrik Dahl

VIENNA (Reuters) - Iran's talks with the U.N. nuclear watchdog about Tehran's atomic programme are going well, a senior Iranian official said on Tuesday, the second day of discussions.

The talks will test Iran's readiness to address U.N. inspectors' concerns over military links to its nuclear work, ahead of wider diplomatic talks on the programme's future in Baghdad next week between Tehran and world powers.

The nuclear watchdog aims at the Vienna talks to gain access to Iranian sites, documents and officials involved in suspected research activity that could be used to develop atomic bombs.

"We had good talks. Everything is (on the) right track. The environment is very constructive," Ali Asghar Soltanieh told reporters as he entered an Iranian diplomatic mission for talks with the Vienna-based International Atomic Energy Agency.

The IAEA, the U.N. agency tasked with preventing the spread of nuclear arms in the world, has made clear that its priority is to visit a military site where Iran may have conducted high-explosives test.

Iran, which rejects Western accusations it seeks nuclear arms, has resisted requests by the IAEA to go to the Parchin complex southeast of Tehran. The issue was expected to be raised during the talks in Vienna.

Iran's state television said Monday's talks have "been evaluated as positive". It did not elaborate.

Israel, widely believed to hold the Middle East's only nuclear arsenal, and the United States have not ruled out military action to prevent Iran from obtaining atomic bombs if diplomacy fails to achieve this goal peacefully.

An IAEA report last November found that Iran had built a large containment vessel in 2000 at the Parchin site in which to conduct tests that the U.N. agency said were "strong indicators of possible (nuclear) weapon development".

It said a building was constructed "around a large cylindrical object". An earth berm between the building containing the cylinder and a neighboring building indicated the probable use of high explosives in the chamber.

DIPLOMACY SEEKS TO AVERT WAR THREAT

The IAEA said it had obtained satellite images that were consistent with this information. The vessel was designed to contain the detonation of up to 70 kg of high explosives.

Western diplomats say they suspect Iran is now cleaning the Parchin site to remove incriminating evidence.

Iran's Foreign Ministry has dismissed the allegations, saying nuclear activities cannot be washed away.

A Vienna-based expert who declined to be identified said it would be difficult, but not impossible, to clean possible traces of uranium or surrogate materials from a site.

Two previous rounds of talks in Tehran this year with U.N. inspectors failed to make any notable progress, especially on their request to go to Parchin.

Western diplomats will be watching the Vienna talks for any sign that Iran is now ready to make concrete concessions, saying this would send a positive message ahead of talks in Baghdad on May 23 between Iran and Western powers.

Iran and the powers involved in nuclear diplomacy - the United States, Russia, China, Britain, France and Germany - revived negotiations in Istanbul last month after a 15-month hiatus and both sides say they hope for progress in Baghdad.

The resumption of diplomacy offers a chance to defuse tension that has led the United States and the European Union to try to block Iran's oil exports through sanctions, and increased worries about a new Middle East war.