By Michelle Moghtader and Fredrik Dahl
DUBAI/VIENNA (Reuters) - Iran is "busy redesigning" a planned research reactor to sharply cut its potential output of plutonium, a senior Iranian official said in comments that seemed to address a thorny issue in negotiations with big powers.
The future of the Arak plant is among several sticking points that Iran and six world powers need to resolve if they are to reach a deal by late July on limiting Iran's controversial nuclear programme in exchange for an end to sanctions.
The main stumbling block is the permissible scope of Iran's uranium enrichment. The lack of progress in bridging negotiating gaps has left the self-imposed July 20 deadline for a long-term settlement looking increasingly unrealistic, and Iran has said a six-month extension may be necessary.
The West is worried that Arak, once operational, could provide a significant supply of plutonium - one of two materials, along with highly enriched uranium, that can produce a nuclear explosion.
Iran says the 40-megawatt Arak reactor is intended to produce isotopes for cancer and other medical treatments. It agreed to halt installation work at Arak under a six-month interim deal struck with the powers last November that was geared to buy time for negotiations on a comprehensive accord.
After the latest round of talks in Vienna in May, a diplomat from one of the powers said Iran had appeared to row back on its previous readiness to address Western fears about the nuclear weapons potential of Arak. Iran has since dismissed one mooted solution as "ridiculous".
But the head of Iran's atomic energy organisation, Ali Akbar Salehi, appeared to return to a more conciliatory stance in comments to the official IRNA news agency late on Wednesday.
The amount of plutonium the reactor will be able to yield will be reduced to less than 1 kg (2.2 pounds) a year from 9-10 kg (20-22 pounds) in its original design, he said. Western experts say 9-10 kg is more than enough for one nuclear bomb.
"We are currently busy redesigning that reactor to arrange for that alteration," Salehi was quoted by IRNA as saying.
After discussions with senior U.S. officials in Geneva earlier this week, Iran questioned the feasibility of the July deadline for a permanent accord, intended to minimise the risk of a wider Middle East war over Tehran's nuclear ambitions.
While an extension is possible under the terms of the talks, experts believe both Iran and the powers may face domestic political pressures to toughen their terms during this extra time period, making a breakthrough harder to achieve.
The next round of negotiations will be held in the Austrian capital Vienna on June 16-20.
“There is a lot of work to be done to reach a comprehensive, credible and lasting agreement," French Foreign Ministry spokesman Romain Nadal said. He said talks between French and Iranian officials in Geneva on Wednesday - part of a series of bilateral meetings between the powers and Iran - were "useful".
In April, Princeton University experts said Arak's annual plutonium production could be lowered to less than 1 kg if Iran changed the way Arak was fuelled and lowered its power capacity.
IRAN COULD REVERT
However, Iran expert Ali Vaez said the major powers and Israel - Iran's arch enemy - remained concerned that Iran could suddenly revert to the original design, and build a reprocessing facility to extract plutonium from spent reactor fuel.
"That would be a lengthy but hard-to-stop process," Vaez, of the International Crisis Group think-tank, said in a report.
Heavy-water reactors like Arak, fuelled by natural uranium, are seen as especially suitable for yielding plutonium.
Nuclear expert David Albright said a key issue in the negotiations was whether Iran would agree to change the Arak reactor core to one sized for low-enriched uranium fuel.
"Then it cannot revert back to a natural uranium core so easily. As of two weeks ago, Iran had not agreed to that," Albright, of the U.S.-based Institute for Science and International Security, said in an email.
The powers want Iran to scale back its capacity to refine uranium in order to deny it any capability to quickly produce enough of the material for a bomb. Iran says it needs to refine uranium to fuel a planned network of nuclear power plants.
French Foreign Minister Laurent Fabius said this week the talks were "still hitting a wall" on the enrichment issue.
After meeting Iranian officials in Rome this week, a senior Russian Foreign Ministry official said some aspects of a comprehensive solution to the Iranian nuclear problem could be agreed during next week's meeting, but more effort was needed.
"The chances for it are increasing. This adds to an optimism but requires additional efforts," the Russian news agencies Itar Tass and Interfax quoted Deputy Foreign Minister Sergei Ryabkov, Moscow's chief negotiator, as saying.
(Additional reporting by Vladimir Soldatkin in Moscow and John Irish in Paris; Editing by Mark Heinrich and Kevin Liffey)