By Justyna Pawlak and Fredrik Dahl
BRUSSELS, Oct 11 (Reuters) - Six world powers and Iran will seek trade-offs between curbing uranium enrichment, allowing intrusive inspections and lifting crippling sanctions when they resume talks next week on Tehran's nuclear programme that could yet trigger a Middle East war.
Negotiators from the major powers and Iran meet in Geneva on Oct. 15-16 in a mood of cautious optimism after a tentative thaw between the Islamic Republic and the United States, arch-foes for more than three decades.
Diplomats believe the meeting offers a rare chance to launch sustained diplomacy and ease mistrust between Tehran and the West, which suspects Iran is covertly seeking the means to make atomic bombs.
Iran's new president, Hassan Rouhani, has signalled some willingness to allay international concerns, which Tehran says are unjustified. It denies the programme has any military aims, saying it is for energy generation and other peaceful purposes.
Rouhani is under time pressure. Tightening sanctions have caused a currency fall and cut oil export revenue by billions of dollars, raising the spectre of popular unrest.
After years of on-and-off talks, western negotiators led by European Union foreign policy chief Catherine Ashton are wary, however, whether an agreement that satisfies both sides can be reached.
It is unclear whether Iran will offer enough for negotiators from the six nations - the United States, Russia, China, France, Britain and Germany - to make a deal and lift major economic sanctions, particularly on the oil and banking sectors.
Following is an explanation of what is at stake in the negotiations, what the West wants to achieve, what Iran wants, and what a final deal could look like.
HIGHER-LEVEL ENRICHMENT
The west's most pressing concerns focus on Iran's efforts to enrich uranium to 20 percent fissile purity. That level closes an important technological gap on the road towards making weapons-grade fuel, and western negotiators say this must be addressed as part of a preliminary confidence-building deal.
In meetings over the last two years, they have demanded that Iran suspend 20 percent enrichment, send its existing stockpile abroad and shutter the Fordow production site buried deep inside a mountain south of Tehran, where most such work is done.
In return, they offered to lift sanctions on trade in gold, precious metals and petrochemicals but Iran has spurned that.
Tehran's stock of 20 percent uranium gas is closely watched in the West; Israel has threatened to attack if diplomacy fails to curb the programme and Iran amasses enough of the material - a short technical step from weapons-grade - to make a bomb.
Since Iran began enriching uranium to a 20 percent concentration in 2010, it has produced more than the 240-250 kg needed for one weapon. But it has kept the stockpile below an Israeli "red line" by converting part of the gas into oxide powder in order, it says, to fuel a medical research reactor.
LOWER-LEVEL ENRICHMENT
If Iranian negotiators want to move more quickly and win broader sanctions relief, they may also have to address lower-level enrichment.
One way to allay western concerns could be to limit Iran's production and stockpile of five-percent uranium, which can be used to fuel power plants but can also provide material for bombs if refined much further to weapons-grade.
Iran could agree to keep its stockpile - which western experts say could already be sufficient for several bombs if processed further - below a certain level or to limit the pace of installation of centrifuges used to enrich uranium.
Iran has put in place thousands of such machines in recent years. The United Nations' nuclear watchdog said in August that Iran had installed a total of 15,416 centrifuges at its Natanz enrichment plant, an increase of 1,861 since May.
OTHER IRANIAN FACILITIES
Western states are also worried about other Iranian nuclear work, including a heavy water research reactor being built near the western town of Arak, which experts say could yield plutonium once it is operational - providing a potential second route to nuclear bombs.
Iran has made further progress in construction at Arak, including putting the reactor vessel in place and beginning to make fuel, a report by the U.N. International Atomic Energy Agency (IAEA) showed in August.
But it also said the planned commissioning of Arak had been delayed from early 2014, potentially buying some time for diplomacy. Iran says the reactor will produce medical isotopes.
A series of U.N. Security Council resolutions since 2006 have demanded that Iran suspend all heavy water-related work.
TRANSPARENCY
For any diplomatic deal to have a chance, diplomats and experts say, the U.N. nuclear watchdog must gain more intrusive inspection powers to ensure that it is implemented and that Iran does not have any hidden atomic activities.
This would require Iran to agree to give the U.N. agency the right to carry out snap inspections outside of its declared nuclear facilities under the so-called Additional Protocol to its safeguards agreement with the IAEA.
Iran says the protocol, which most if not all other countries adhere to, is voluntary. Since Rouhani's election, it has pledged to "expand" cooperation with the IAEA.
The powers would also want Tehran to implement rules that would require it to give the IAEA early notice of any plans to build new nuclear facilities, not just six months before nuclear material is introduced in the facility as is the case now.
"Although Tehran is unlikely to accept dismantlement of its nuclear programme and facilities, it may be willing to accept enhancements to the IAEA inspection regime," the Arms Control Association, a U.S.-based advocacy and research group, said.
The IAEA is also seeking to look into suspicions that Iran may have coordinated efforts to process uranium, test explosives and adapt a ballistic missile cone so it could fit a nuclear warhead.
The IAEA and Iran have held 11 meetings since early 2012 in an attempt by the U.N. agency to resume its investigation into suspected atomic bomb research, so far without success. Iran denies any such activities.
A key demand by the IAEA is to inspect the Parchin military facility, where it suspects Iran carried out nuclear-related explosives tests, perhaps a decade ago.
THE ENDGAME
The contours of a final deal are far from clear. The U.N. Security Council has called on Iran, in a series of resolutions, to suspend uranium enrichment entirely. But western diplomats acknowledge, in private, that some Iranian enrichment will have to be allowed, under very strict supervision and with caps on production capacity and stockpiling.
Iran wants the powers to recognise what it calls its "right" to uranium enrichment and to lift the sanctions crippling its economy.
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