By Parisa Hafezi and Fredrik Dahl
GENEVA (Reuters) - Iran said on Saturday it cannot accept any agreement with six major powers that does not recognise what it describes as its right to enrich uranium, a demand the United States and its European allies have repeatedly rejected.
Deputy Foreign Minister Abbas Araqchi's statement, late on the unscheduled fourth day of talks over Tehran's nuclear program, appeared to signal a hardening of its position on an issue that Western diplomats earlier suggested may have been resolved thanks to a compromise proposal they floated.
It cast doubt on whether Iran and the six powers would succeed in bridging the remaining difficulties and clinch a breakthrough deal under which the Islamic state would curb its atomic activities in exchange for limited sanctions relief.
Earlier on Saturday, U.S. Secretary of State John Kerry and foreign ministers of the five other nations joined the talks with Iran as the two sides appeared to be edging closer to a long-sought preliminary agreement.
"In the past 10 years, Iran has resisted economic and political pressures and sanctions aimed at abandoning its enrichment activities," Araqchi told reporters.
"Therefore any agreement without recognising Iran's right to enrich, practically and verbally, will be unacceptable for Tehran," he said.
Araqchi said that "98 percent progress" had been achieved in the talks with Britain, China, France, Germany, Russia and the United States, adding there were only a few areas of disagreement remaining.
As he was speaking, the six powers met internally to discuss their position. Araqchi suggested talks could run into Sunday.
The demand that Iran stop or slow construction of a reactor that could yield potential bomb material was among other outstanding problems holding up an agreement, diplomats said.
British Foreign Minister William Hague and Germany's Guido Westerwelle both cautioned that a deal was not yet guaranteed and that there was work still to do.
Hague said there was a "huge amount of agreement" but that the remaining gaps were important and the talks remained difficult.
NOT 'A DONE DEAL'
The Western powers' goal is to cap Iran's nuclear energy programme, which has a history of evading U.N. inspections and investigations, to remove any risk of Tehran covertly refining uranium to a level suitable for bombs.
Tehran denies it would ever "weaponise" enrichment.
The draft deal would see Iran suspend some nuclear activities in exchange for the release of billions of dollars in Iranian funds frozen in foreign bank accounts, and renewed trade in precious metals, petrochemicals and aircraft parts.
The United States might also agree to relax pressure on other countries not to buy Iranian oil. Tehran has made clear it wants a more significant dismantling of Western sanctions on its oil exports and use of the international banking system.
Refined uranium can be used to fuel nuclear power plants - Iran's stated goal - but also provide the fissile core of an atomic bomb if refined much further.
Russian Deputy Foreign Minister Sergei Ryabkov said Iran's demand to continue construction of the Arak heavy-water reactor that could produce plutonium - an alternative bomb material - remained a tough outstanding issue.
Iran says the Arak plant will only produce medical isotopes, but Western governments and nuclear analysts have doubts.
Germany's Westerwelle told reporters: "It's not a done deal. There's a realistic chance, but there's a lot of work to do."
The talks aim to find a package of confidence-building steps to ease decades of tensions and banish the spectre of a Middle East war over Tehran's nuclear aspirations.
The preliminary pact would run for six months while the powers and Tehran hammer out a broader, longer-term settlement.
Diplomacy was stepped up after the landslide election of Hassan Rouhani, a relative moderate, as Iranian president in June, replacing bellicose nationalist Mahmoud Ahmadinejad.
Rouhani aims to mend fences with big powers and get sanctions lifted. He obtained crucial public backing from Supreme Leader Ayatollah Ali Khamenei, keeping powerful hardline critics at bay.
French Foreign Minister Laurent Fabius, who objected to what he felt was a one-sided offer to Iran floated at the previous negotiating round from November 7-9, seemed guarded on arrival on Saturday.
"I hope we can reach a deal, but a solid deal. I am here to work on that," he said. France has consistently taken a tough line over Iran's nuclear programme, helping Paris cultivate closer ties with Tehran's adversaries in Israel and the Gulf.
Kerry went to Geneva "with the goal of continuing to help narrow the differences and move closer to an agreement," State Department spokeswoman Jen Psaki said. Direct U.S.-Iranian engagement is crucial to a peaceful solution given the rupture in bilateral ties since Iran's Islamic Revolution in 1979.
As a signatory to the Non-Proliferation Treaty, Iran has always sought recognition of its "right to enrich" uranium, but Western powers say that is not enshrined in the NPT.
Iranian Foreign Minister Mohammad Javad Zarif said, "Enrichment in Iran will not stop and ... enrichment will be a part of any agreement."
European Union foreign policy chief Catherine Ashton, who is coordinating the talks with Iran on behalf of the six nations, held "intensive discussions" with Zarif throughout Saturday, her spokesman said.
For the powers, an interim deal would mandate a halt to Iran's enrichment of uranium to a purity of 20 percent - a major step towards the bomb threshold, more sweeping U.N. nuclear inspections and a halt to the construction of the Arak reactor.
The OPEC producer rejects suspicions it is covertly trying to develop the means to produce nuclear weapons, saying it is stockpiling nuclear material for future atomic power plants.
Israel says the deal being offered would give Iran more time to master nuclear technology and amass potential bomb fuel. Prime Minister Benjamin Netanyahu told local media in Moscow that Iran was essentially given an "unbelievable Christmas present - the capacity to maintain this (nuclear) breakout capability for practically no concessions at all".
(Additional reporting by Stephanie Nebehay, Justyna Pawlak, John Irish, Arshad Mohammed, Louis Charbonneau in Geneva, Katya Golubkova in Moscow, Isabel Coles in Dubai; Editing by Mark Heinrich, Robin Pomeroy and Peter Cooney)