UPDATE 3-Iran defiant on enrichment ahead of possible nuclear talks

* Iran: no higher-grade enrichment halt due to external

demands

* EU responds that Iran must address international concerns

* No direct US-Iran talks unless pressure eases -foreign

minister

DUBAI, Dec 18 (Reuters) - Iran will not stop higher-grade

uranium enrichment in response to external demands, its top

nuclear energy official was quoted as saying on Tuesday,

signalling a tough bargaining stance ahead of planned new talks

with world powers.

The West wants Iran to halt enrichment of uranium to a

fissile concentration of 20 percent as it represents a

significant step closer to the level that would be required to

make nuclear bombs. Iran says it needs this higher-grade uranium

to run its medical research reactor in Tehran.

Israel has threatened air strikes on Iran if its nuclear

work is not curbed through diplomacy or sanctions, raising the

spectre of a Middle East war damaging to the global economy.

Iran "will not suspend 20 percent uranium enrichment because

of the demands of others," said Fereydoun Abbasi-Davani, head of

Iran's Atomic Energy Organisation, the Iranian Students' News

Agency (ISNA) reported.

Iran "will produce 20 percent enriched uranium to meet its

needs and for however long it is required."

He did not specify what he meant by "needs". Western

diplomats say Iran already has made sufficient amounts to fuel

its Tehran Research Reactor for several years. Abbasi-Davani has

in the past said Iran plans to build another research reactor.

The European Union quickly responded to Abbasi-Davani's

comments, saying Iran must come to grips with increasing

international disquiet over the ultimate purpose of its uranium

enrichment programme to resolve the protracted dispute.

"Iran has to address the immediate key concern, which is the

issue of 20 percent enrichment, by taking an initial

comprehensive confidence-building step in this area, thereby

creating space for more diplomacy and negotiations," the

spokesman for EU foreign policy chief Catherine Ashton said.

In his statements, Abbasi-Davani signalled renewed Iranian

defiance in negotiations with world powers expected to resume

soon. But he did not appear to categorically rule out that

Tehran at some point could shelve higher-grade enrichment.

The powers - the United States, France, Britain, Germany,

China and Rusia - also want Iran to shut down the Fordow

underground site where its 20 percent enrichment is carried out.

Nuclear expert Mark Fitzpatrick, of the International

Institute for Strategic Studies, said about Abbasi-Davani's

comments: "This hard line doesn't bode well for success in the

next round of talks, where stopping the 20 percent enrichment is

just one of the steps Iran will be asked to take."

BEHIND THE SCENES

But others suggested Abbasi-Davani's comments, and those of

other Iranian officials, were intended more for public

consumption at home and abroad.

Iranian foreign and security policies are ultimately decided

by clerical Supreme Leader Ayatollah Ali Khamenei.

"What matters is not stay-the-course statements like these

but whether behind the scenes the Supreme Leader and his

entourage, and the Obama White House, step out of their shadow

and agree to direct bilateral talks," Mark Hibbs, of the

Carnegie Endowment think tank, said.

Iranian foreign ministry spokesman Ramin Mehmanparast said

Iranian and EU officials had held discussions regarding the time

and place of the next negotiations between the powers and Iran.

"If there is an agreement, it will be announced,"

Mehmanparast said in his weekly news conference.

The EU spokesman said the six powers are still waiting for

an Iranian answer regarding a possible date for new talks: "We

made contact last week and suggested getting together for

another round. We are waiting to hear the response."

Though Israel has threatened to bomb Iranian nuclear sites,

Vice Prime Minister Moshe Yaalon said the Jewish state had

noticed renewed U.S.-led efforts to curb Iran's nuclear work

since President Barack Obama's re-election last month, including

preparation for possible military action.

He also cited contacts among the powers and Iran about

holding new negotiations and ongoing sanctions against Iran.

Iranian media quoted Foreign Minister Ali Akbar Salehi as

saying that any calls for direct talks between the U.S. and Iran

were meaningless as long as Washington continued to exert

pressure on Iran through sanctions and other measures.

In October, the New York Times reported that secret

exchanges between U.S. and Iranian officials had yielded

agreement "in principle" to hold one-on-one talks. Both Iran and

the United States denied that the two countries had scheduled

direct bilateral negotiations on the nuclear programme.

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