Iran proposes Arak reactor change to cut plutonium output ...

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VIENNA (Reuters) - Iran has made a proposal that would significantly lower plutonium production at a planned reactor, a senior Iranian official was quoted as saying, signalling flexibility on a key issue in talks to end the nuclear dispute with world powers.

The comment by Ali Akbar Salehi, head of Iran's atomic energy organisation, was the latest sign that a compromise may be possible over the Arak research reactor, which the West fears could yield weapons-usable material. Iran denies any such aim.

The fate of the heavy-water plant, which has not yet been completed, is one of the central issues in negotiations between Iran and six major powers aimed at reaching a long-term deal on Tehran's nuclear programme by an agreed July 20 deadline.

Iran and the United States, France, Germany, Britain, Russia and China on Wednesday ended their last round of negotiation in Vienna and said they would start drafting an agreement at their next meeting there on May 13. But officials said significant gaps needed to be bridged.

The website of Iran's English-language state television Press TV, citing Salehi late on Wednesday, said Iran had offered a "scientific and logical proposal to clear up any ambiguities" over the Arak reactor.

"In our plan, we explained that we would redesign the heart of the Arak reactor, so that its production of plutonium will decrease drastically," Salehi was quoted as saying.

RUSSIA SEES ARAK COMPROMISE

The West is worried that Arak, once operational, could provide a supply of plutonium - one of two materials, along with highly enriched uranium, that can trigger a nuclear blast.

The Islamic Republic has said that the 40-megawatt 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 accord struck on November 24 which was designed to buy time for negotiations on a comprehensive deal.

Russia's chief negotiator suggested after the April 8-9 talks that progress had been achieved on Arak. "The possibility of a compromise on this issue has grown," Interfax news agency quoted Deputy Foreign Minister Sergei Ryabkov as saying.

Heavy-water reactors like Arak, fuelled by natural uranium, are seen as especially suitable for yielding plutonium.

"It agreed to halt installation work at Arak under a six-month interim accord struck on November 24 which was designed to buy time for negotiations on a comprehensive deal.Russia's chief negotiator suggested after the April 8-9 talks that progress had been achieved on Arak"To do so, however, a spent fuel preprocessing plant would also be needed to extract it. Iran is not known to have any such plant.

If operating optimally, Arak - located about 250 km (150 miles) southwest of Tehran - could produce about nine kg of plutonium annually, the U.S. Institute for Science and International Security says.

Any deal must lower that amount, Western experts say.

Last week, Princeton University experts said that annual plutonium production could be cut to less than a kilogram - well below the roughly 8 kg needed for an atomic bomb - if Iran altered the way Arak is fuelled and lowered its power capacity.

(Additional reporting by Mehrdad Balali in Dubai; Editing by Robin Pomeroy)

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