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By Justyna Pawlak
BRUSSELS (Reuters) - Negotiators from the European Union and Iran will meet in Istanbul this month to discuss future diplomatic efforts to resolve a decade-old dispute over Tehran's nuclear program.
The May 15 meeting between the EU's foreign policy chief Catherine Ashton, who leads diplomacy with Iran on behalf of six world powers, and Tehran's chief nuclear negotiator Saeed Jalili follows a failed round of talks in Kazakhstan in April.
Its outcome may be crucial in deciding whether a new round of negotiations can take place, and when, Western diplomats say.
Before diplomacy resumes, the six powers - the United States, Russia, China, France, Britain and Germany - want to reinforce to Tehran that no deal can be reached without Iran addressing its most sensitive nuclear work, their main concern.
Iran had refused at the talks in April in Almaty to stop enriching uranium to levels that close a significant technological gap en route to making weapons-grade material.
Critics say Iran is trying to achieve the ability to make bombs. Tehran denies this, saying says it needs nuclear power for energy generation and medical purposes.
The six nations are eager to keep diplomacy on track, fearing a breakdown could drive Israel, to attack Iran, which the Jewish state, widely believed to have the only nuclear arsenal in the region, views as an existential threat.
But they need to decide, for example, whether they are willing to sweeten their demands with new offers of relief from sanctions, and whether they should step up economic pressure in the meantime.
"The (Istanbul) meeting is a follow-up to the last round of negotiations," Ashton's spokesman Michael Mann said on Thursday.
In Almaty, the six powers offered to ease European and U.S. restrictions on some trade in return for Tehran stopping enrichment of uranium to 20 percent fissile purity and suspending work at the underground Fordow facility where such work is done.
Tehran says, however, that such moves are not enough, and wants all major economic sanctions - in the oil and banking sectors - lifted before it makes any concessions.
Western diplomats say full-scale negotiations are unlikely to resume before the presidential election in Iran on June 14.
That could give them time to decide on any new steps, while domestic political situation in Iran clears up.
"The goal for each side through the fall is to consider what is its last best offer and hopefully move from where they are now," said Cliff Kupchan, Middle East director at the Eurasia consultancy. "We have a case now of mutual intransigence."
Some Western diplomats say new economic sanctions may be used to pressure the Tehran government's ability to fund its work.
An EU official dealing with sanctions policy, Francesco Fini, said last month new sanctions could not be ruled out "as long as Iran doesn't provide sufficient answers in negotiations".
But for now, senior officials have urged caution. Secretary of State John Kerry asked for patience from U.S. senators pressing for tougher sanctions over Tehran's nuclear ambitions, citing uncertainty in Iran ahead of the election.
Iran has yet to comment on the new meeting, but last week deputy nuclear negotiator Ali Bagheri said Tehran was waiting for Ashton to suggest a time and venue for full-scale negotiations.
The Istanbul meeting will coincide with talks in Vienna between the U.N. nuclear watchdog and Iran, which are separate from, but closely linked to, the broader diplomacy.
The International Atomic Energy Agency has tried for more than a year to coax Tehran to allow its inspectors to resume a long-stalled investigation into suspected atom bomb research by the Islamic state.
(Additional reporting by Fredrik Dahl in Vienna; Editing by Alison Williams)