UPDATE 2-Netanyahu warns against diplomatic path with Iran

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* Iran must close nuclear facility near Qom, says Israeli PM (Adds Netanyahu quotes, background)

By Jeffrey Heller

OTTAWA, March 2 (Reuters) - Israeli Prime Minister Benjamin Netanyahu said on Friday global powers would be falling into a trap if they pursued talks with Iran and he challenged Tehran with a series of demands before he meets U.S. President Barack Obama.

But at the same time, Netanyahu was careful at a news conference with Canada's leader to avoid widening a rift with Obama over what Washington fears could be an Israeli rush to attack Iranian nuclear facilities before economic sanctions and diplomacy run their course.

Israel, Netanyahu said, has not set nor does it intend to set red lines for the United States in preventing Iran from using its uranium enrichment program to obtain nuclear weapons.

Facing sanctions that could cripple its oil exports, Iran said last month it wanted to resume talks on its nuclear programme, negotiations frozen since January last year. But six big powers, represented by EU foreign policy chief Catherine Ashton, have yet to respond to the offer.

"It (Iran) could do again what it has done before, it could pursue or exploit the talks as they've done in the past to deceive and delay so that they can continue to advance their nuclear program and get to the nuclear finish line by running up the clock, so to speak," Netanyahu said.

"I think the international community should not fall into this trap," he told reporters, with Canadian Prime Minister Stephen Harper, a staunch ally of Israel, at his side.

A report by the IAEA last week said Iran was significantly stepping up uranium enrichment, a finding that sent oil prices higher on fears tensions between Tehran and the West could escalate into military conflict.

In some of his strongest comments yet on Iran, Obama said in an interview published on Friday that "all options are on the table" for dealing with Iran's nuclear plans and added that the final option was the "military component."

Setting what a spokesman for Netanyahu called new benchmarks, the Israeli leader demanded Iran dismantle an underground nuclear facility near the city of Qom, stop uranium enrichment and remove all uranium enriched above 3.5 percent from the country.

Israel fears the Fordow enrichment site, in a mountain outside Qom, would create "a zone of immunity" from Israeli air strikes.

Iran two years ago started refining uranium to a fissile concentration of 20 percent at another more vulnerable site, Natanz -- far more than the 3.5 percent level usually required to power nuclear energy plants.

Tehran says it will use 20 percent-enriched uranium to convert into fuel for a research reactor making isotopes to treat cancer patients, but Western officials say they doubt that the country has the technical capability to do that.

Nuclear bombs require uranium enriched to 90 percent, but Western experts say much of the effort required to get there is already achieved once it reaches 20 percent concentration, shortening the time needed for any nuclear weapons "break-out." (Reporting by Jeffrey Heller, David Ljunggren and Randall Palmer; Editing by Anthony Boadle)

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