By Louis Charbonneau, Fredrik Dahl and Justyna Pawlak
GENEVA (Reuters) - U.S. Secretary of State John Kerry will join nuclear talks between major powers and Iran in Geneva on Friday in an attempt to nail down a long-elusive accord to start resolving a decade-old standoff over Tehran's atomic aims.
Kerry, on a Middle East tour, will fly to the Swiss city at the invitation of European Union foreign policy chief Catherine Ashton in "an effort to help narrow differences" in the negotiations, a senior State Department official said.
Ashton is coordinating talks with Iran on behalf of the five permanent U.N. Security Council members plus Germany.
After the first day of meetings set for Thursday and Friday, both sides said progress had been made towards an initial agreement under which the Islamic state would curb some of its nuclear activities in exchange for limited relief from punitive measures that are severely damaging its oil-dependent economy.
U.S. President Barack Obama said the international community could slightly ease sanctions against Iran in the early stages of negotiating a comprehensive deal on Tehran's atomic program to remove fears about Iranian nuclear intentions.
"There is the possibility of a phased agreement in which the first phase would be us, you know, halting any advances on their nuclear program ... and putting in place a way where we can provide them some very modest relief, but keeping the sanctions architecture in place," he said in an interview with NBC News.
Negotiators in Geneva cautioned, however, that work remained to be done in the coming hours in very complex talks and that a successful outcome was not guaranteed. Iran rejects Western accusations that it is seeking a nuclear bomb capability.
Kerry said in Israel, Iran's arch foe, that Tehran would need to prove that its atomic activities were peaceful, and that Washington would not make a "bad deal, that leaves any of our friends or ourselves exposed to a nuclear weapons program".
"We're asking them to step up and provide a complete freeze over where they are today," he said in a joint interview with Israel's Channel 2 television and Palestinian Broadcasting Corporation recorded in Jerusalem on Thursday.
In Geneva, Iranian Deputy Foreign Minister Abbas Araqchi said it was too early to say with certainty whether a deal would be possible this week, although he voiced cautious optimism.
"Too soon to say," Araqchi told reporters after the first day of talks between Iran and the United States, Russia, China, Britain, France and Germany. He added, "I'm a bit optimistic."
"We are still working. We are in a very sensitive phase. We are engaged in real negotiations."
The fact that an agreement may finally be within reach after a decade of frustrated efforts and hostility between Iran and the West was a sign of a dramatic shift in Tehran's foreign policy since the election of a relative moderate, Hassan Rouhani, as Iranian president in June.
The United States and its allies are aiming for a "first-step" deal that would stop Iran from further expanding a nuclear program that it has steadily built up in defiance of tightening international pressure and crippling sanctions.
The Islamic Republic, which holds some of the world's largest oil and gas reserves, wants them to lift increasingly tough restrictions that have slashed its daily crude sales revenue by 60 percent in the last two years.
Both sides have limited room to maneuver, as hardliners in Tehran and hawks in Washington would likely sharply criticize any agreement they believed went too far in offering concessions to the other side.
U.S. SENATE MAY SEEK MORE SANCTIONS
Lending urgency to the need for a breakthrough was a threat by the U.S. Congress to pursue tough new sanctions on Iran.
Obama has been pushing Congress to hold off on more sanctions against Iran, demanded by Israel, to avoid undermining the diplomacy aimed at defusing fears of an Iranian advance towards nuclear arms capability.
But many U.S. lawmakers, including several of Obama's fellow Democrats, believe tough sanctions brought Iran to the negotiating table and that more are needed to discourage it from building a nuclear bomb.
Ashton's spokesman said on Thursday evening that the powers and Iran were "making progress" towards easing the standoff.
Iran's foreign minister and chief negotiator, Mohammad Javad Zarif, told Reuters earlier in the day: "I'm hopeful that we can move forward. We are making progress, but it's tough."
In an interview with CNN later, Zarif suggested that a partial suspension of Iran's contested uranium enrichment campaign might be possible - a concession it ruled out before moderate Rouhani's landslide election.
"There won't be a suspension of our enrichment program in its entirety," Zarif said, rejecting Israel's central demand.
But he said he hoped the sides would agree on a joint statement on Friday stipulating a goal to be reached "within a limited period of time, hopefully in less than a year", and a series of reciprocal actions they would take "to build confidence and address their most immediate concerns."
Iran says it is enriching uranium only to fuel future nuclear power stations and for medical purposes. But its refusal to halt activity which can also have military applications has led to draconian U.S., EU and U.N. sanctions.
The United States said it also held "substantive and serious" bilateral talks with Iran in Geneva - direct dialogue inconceivable before Rouhani took office pledging to build bridges abroad and end a slide towards conflict with the West.
Iran and the United States have had no diplomatic ties since soon after the 1979 Islamic Revolution that overthrew the U.S.-backed monarchy, and their mutual mistrust and enmity have posed the biggest obstacle to any breakthrough nuclear accord.
ISRAEL SEES 'HISTORIC' MISTAKE
Israeli Prime Minister Benjamin Netanyahu said he disliked the outlines of an initial deal being hinted at in Geneva since it would allow Iran to keep a nuclear capability.
"Israel totally opposes these proposals," he said in a speech. "I believe that adopting them would be a mistake of historic proportions. They must be rejected outright."
Widely assumed to be the Middle East's only nuclear power, Israel views Iran as a threat to its existence and has warned it could carry out pre-emptive strikes on Iranian nuclear sites if diplomacy fails to restrain the program.
Israel has campaigned against compromise proposals under discussion in Geneva, describing them as potentially "a mistake of historic proportions".
Araqchi met for an hour with U.S. delegation chief Wendy Sherman, undersecretary of state for political affairs, in a meeting that a senior State Department official described as a "substantive and serious conversation".
The United States and its allies say they are encouraged by Tehran's shift to softer rhetoric since the election of Rouhani. But Western allies say Iran must back its words with action and take concrete steps to scale back its atomic work.
Washington says that would buy time for Iran and the powers to reach a broader diplomatic settlement and avert any war that could cause global economic upheaval.
"It remains our assessment that Iran would need at least one year to acquire one nuclear weapon from the time that Iran decides to pursue one," White House spokesman Jay Carney said.
The exact nature of a possible first step remains unclear. But the six global powers are unlikely to agree on anything less than a suspension of enrichment of uranium to 20 percent fissile purity, a level that constitutes a technical milestone not far from the threshold for a nuclear warhead.
They want Iran to convert its stockpile of 20 percent uranium to an oxide form suitable for processing into reactor fuel, and take other measures to slow the program.
A senior aide to a U.S. senator briefed by the White House and State Department said Washington would offer to work with Iran in a six-month confidence-building period. During that time, Washington would offer Tehran, among other things, relaxed restrictions on Iranian funds held in overseas accounts.
(Additional reporting by Justyna Pawlak and Yeganeh Torbati in Geneva, Timothy Gardner in Washington,; Marcus George in Dubai, Michelle Nichols in New York; Editing by Mohammad Zargham, Xavier Briand and Peter Cooney)