The crisis over Iran's atomic agenda is deepening, but the world's nuclear watchdog chief has warned there may be no choice but to accept limited uranium enrichment by Tehran, diplomats say.
For a mistrustful West, the quid pro quo would be to give U.N. inspectors more intrusive powers via a Security Council resolution to prevent suspected atomic bomb projects.
Tehran in turn would have to pledge no industrial-scale enrichment of uranium.
Countries on the board of the International Atomic Energy Agency (IAEA) have called for the Iranian controversy to be referred to the U.N. Security Council by March 6.
Iran hit back by breaking a moratorium on enrichment, the process of making fuel for atomic plants or, potentially, bombs.
The board vote has driven Iran into a corner under a banner of national pride and risks paralyzing the Council given that veto-holding Russia and China reject sanctions on Tehran mooted by Washington, IAEA veterans say.
IAEA chief Mohamed ElBaradei will make no recommendations in a broad report on three years of probes in Iran he is to give to board members on February 27, a week before they convene to weigh whether to urge a course of action by the Security Council.
But he has already suggested in diplomatic circles that a compromise may lie in accepting small-scale enrichment in Iran in exchange for guarantees of no full nuclear fuel production that could enable diversions into bomb-making, diplomats say.
IAEA spokeswoman Melissa Fleming said ElBaradei was still advocating publicly and privately that Iran take steps to earn international confidence by shelving enrichment-related work and cooperating fully with agency investigations.
"He has also told diplomats that Natanz (pilot enrichment plant) is Iran's bottom line, a sovereignty issue, a reality we may have to deal with," a diplomat close to the IAEA, who asked for anonymity due to the subject's sensitivity, said.
"Nothing of consequence will happen in the Security Council because the Russians and Chinese will block sanctions," the diplomat said of the two non-Western big powers determined to protect massive energy investments and trade with Iran.
Iran receptive to Elbaradei idea
Iranian Foreign Minister Manouchehr Mottaki has welcomed ElBaradei's idea as a potential way to dispel Western suspicions Tehran seeks atomic bombs, while retaining its "irrefutable right to acquire nuclear technology" for electricity generation.
As an incentive for Iran to renounce its goal of industrial enrichment, Russia has offered to provide it purified uranium under a joint venture. This could prevent development of fissile fuel on Iranian soil that might be siphoned into warheads.
Iran agreed to negotiations on the idea in Moscow this week but its Atomic Energy Organization chief warned Iran would accept no deal excluding enrichment at home.
"We are a nuclear country. The (West) knows it has no other choice but to negotiate," Gholamreza Aghazadeh told state television, adding that Iran had invited Western countries to invest in Natanz and be present on site.
"There is no greater objective guarantee (against bomb-building) we can provide to the world," he said.
Last week Iran resumed test-feeding of uranium UF6 gas into a few centrifuges, which spin at supersonic speeds to yield fuel for nuclear plants or, if enriched to high levels, for warheads.
Analysts believe it may take Iran months to revive a cascade of 164 centrifuges corroded by disuse, and considerably longer to hurdle technological barriers to running the minimum 1,000 that would be needed to make fuel for a single crude bomb.
But U.S. and EU leaders, citing Tehran's past record of hiding nuclear work from the IAEA, object that to give Iran any leeway to ramp up UF6 production will hand it the know-how to "break out" with a nuclear arsenal whenever it so chooses.
Then it will be too late to prevent Iran endangering world peace, they say, pointing to the Islamic Republic's calls for Israel's destruction and alleged support for Muslim militants.
"ElBaradei's suggestion seems naive ... If the Iranians get the compromise he's raised, they're likely to demand more concessions, especially operating more centrifuges," said David Albright, a former IAEA inspector in Iraq and director of the Institute for Science and International Security in Washington.
Iran cites a right to develop civilian nuclear energy as a party to the nuclear Non-Proliferation Treaty (NPT).
Toughening the NPT may be the only viable way out of the crisis given Security Council deadlock over sanctions and Iran's promise to enrich under IAEA monitoring, some analysts say.