By Arshad Mohammed and Ramin Mostafavi
WASHINGTON/TEHRAN (Reuters) - Major powers signaled on Friday their willingness to reopen talks about curbing Iran's suspected pursuit of nuclear weapons but said Tehran must show it is serious about any negotiations.
The focus on diplomacy follows weeks of rising tensions between the West, which is seeking to cut Iran's oil sales, and Tehran, which has threatened to close the Strait of Hormuz through which almost one-fifth of oil traded worldwide flows.
Alarmed Arab neighbors made a plea to avoid escalating the dispute over Iran's nuclear program, while an ally of Iran's supreme leader called for Israel to be "punished" for allegedly killing an Iranian nuclear scientist.
The West suspects Iran is using its civilian nuclear program as a cover to develop atomic weapons and has pursued a two-track approach of sanctions and diplomacy to try to rein it in. Iran says its nuclear program is solely to produce electricity.
While major powers stressed their openness to renewed talks,
diplomats said they remained divided on their approach, notably on whether to let Iran keep enriching uranium at some level.
The group, known as the P5+1 and as the EU3+3, includes Britain, China, France, Germany, Russia and the United States.
EU foreign policy chief Catherine Ashton, who represents the group, issued a statement making clear that a diplomatic path remained open to Iran despite tougher sanctions and fresh speculation of a military strike on its nuclear facilities.
"The EU3+3 has always been clear about the validity of the dual track approach," Ashton's spokesperson said in a statement that included her October 21 letter to the Iranians laying out the possibility of talks. "We are waiting for the Iranian reaction."
The release of the statement and letter appeared to reflect frustration at Iran's statements hinting at a willingness to resume talks but Tehran's failure to formally respond to the letter and commit to discussing the nuclear program in earnest.
In Beijing, China leaned on a visiting Iranian delegation, led by Supreme National Security Council Deputy Secretary Ali Baqeri, to return to nuclear talks, saying it was a "top priority," the Xinhua news agency said on Saturday.
"China believes the Iran nuclear issue should be resolved peacefully through dialogues and negotiations, and that sanctions and military means will not fundamentally address the problem," Xinhua said, citing Chinese Assistant Foreign Minister Wu Hailong at the Friday meeting.
Xinhua said the Iranian side "expressed its willingness to resume talks" and to "strengthen cooperation" with the International Atomic Energy Agency, the U.N.'s energy watchdog.
CONCILIATORY TONE FROM CLINTON
U.S. Secretary of State Hillary Clinton struck a decidedly conciliatory tone at a news conference with German Foreign Minister Guido Westerwelle in Washington.
"We do not seek conflict. We strongly believe the people of Iran deserve a better future," she said. "They can have that future, the country can be reintegrated into the global community ... when their government definitively turns away from pursuing nuclear weapons.
"We have to see a seriousness and sincerity of purpose coming from them."
Westerwelle said, "One thing is clear: the door for serious dialogue remains open but the option of nuclear weapons in Iran is not acceptable."
Diplomats said major powers were divided over what incentives to offer Iran if talks were to resume.
A central issue is whether the group might ask Iran to cease enriching uranium to the higher level of 20 percent but allow it, at least for a time, to continue enriching at lower levels -
a stance partly at odds with the group's past positions.
Uranium enrichment is a process that at low levels can yield fuel for nuclear power plants or, if carried out to much higher levels of purity, can generate fissile material for bombs.
To let Iran enrich at lower levels would be something of a concession by the P5+1, although it has previously offered a temporary "freeze-for-freeze" in which Iran would not expand its nuclear program and the powers would not pursue more sanctions.
IRANIAN CALLS FOR PUNISHING ISRAEL
After Supreme Leader Ayatollah Ali Khamenei paid his respects to the families of two scientists assassinated on what Tehran believes were Israel's orders, one of them just last week, a close ally demanded retribution.
"Terrorism has a long history in some countries like the Zionist regime," Ali Larijani, speaker of Iran's parliament and a former nuclear negotiator, said of Israel, which views an atomic bomb in Iran's hands as a threat to its survival.
"The Zionist regime should be punished in a way that it can not play such games with our country again."
Such threats have been made before in Tehran and it is unclear how or when they might be carried out. Israel, widely assumed to have the only nuclear arsenal in the Middle East, is on guard against attacks on its borders and within, notably by Lebanon's Hezbollah movement, which is supported by Iran.
Obama's top military official, chairman of the Joint Chiefs of Staff General Martin Dempsey, briefly visited Israel and was quoted by its Defense Ministry as telling officials there that Washington was keen to coordinate on strategy.
"We have many interests in common in the region in this very dynamic time and the more we can continue to engage each other, the better off we'll all be," Dempsey was quoted as saying in a statement issued by the Israeli Defense Ministry.
The comments may reflect U.S. concerns about the possibility that Israel, which has previously bombed nuclear facilities in Iraq and in Syria, might launch an attack on Iran.
French President Nicolas Sarkozy said on Friday that time was running out to avoid a military intervention and appealed to China and Russia, veto-wielding U.N. powers that have been reluctant to tighten sanctions, to support new sanctions.
"Time is running out. France will do everything to avoid a military intervention," Sarkozy told ambassadors gathered in Paris. "A military intervention will not solve the problem, but it will unleash war and chaos in the Middle East."
"We need stronger, more decisive sanctions that stop the purchase of Iranian oil and freezes the assets of the central bank, and those who don't want that will be responsible for the risks of a military conflict," Sarkozy warned.
"We really need you," he said in an appeal to Moscow and Beijing.
(Writing by Alastair Macdonald; Additional reporting by Lucy Hornby in Beijing, Editing by Bill Trott and Peter Cooney)