UPDATE 5-UN nuclear assembly rejects Arab move targeting Israel
* Step urging Israel to join anti-atom bomb pact rebuffed
* Outcome of close vote is diplomatic victory for U.S.
* Arabs say alleged Israel nuclear arsenal threat to peace (Adds quotes by Arab League chief, paragraph 16)
VIENNA, Sept 24 (Reuters) - Member states of the U.N. nuclear watchdog narrowly rejected an Arab-sponsored resolution on Friday calling on Israel to join a global anti-atomic weapons treaty, a U.S. victory after a bruising diplomatic battle.
Washington had urged countries to vote down the symbolically important although non-binding resolution, saying it could derail broader efforts to ban nuclear warheads in the Middle East and also damage fresh Israeli-Palestinian peace talks.
"The winner here is the peace process, the winner here is the opportunity to move forward with a zone free of weapons of mass destruction in the Middle East," said Glyn Davies, the U.S. ambassador to the International Atomic Energy Agency (IAEA).
He spoke after a tense debate that highlighted deep divisions between largely Western states and developing nations.
Israel is widely believed to hold the Middle East's only nuclear arsenal and is also the only country in the tinderbox region outside the nuclear Non-Proliferation Treaty (NPT).
Arab states backed by Iran say this poses a threat to peace and stability. They want Israel to subject all its atomic facilities to IAEA monitoring. Israel says it would only join the pact if there is a comprehensive Middle East peace.
The envoy of Iran, accused by the West of seeking to develop atomic bombs behind the cover of a declared civilian nuclear energy program, called the outcome a setback for the NPT and vowed that the drive to push Israel to sign on would not end.
"This is an irreversible road," Ali Asghar Soltanieh said.
Israel has never confirmed nor denied having atomic bombs, under a policy of ambiguity to deter its Arab and Islamic foes.
ARABS "WON'T BE DETERRED"
Forty-six delegations voted in favor of the resolution and 51 against. Other delegations in the general assembly of the 151-member IAEA either abstained or were absent.
A similar resolution expressing concern at "Israel's Nuclear Capabilities" was approved in a close vote at last year's General Conference, as the annual IAEA gathering is known.
"The vote result is an important victory for the moral stand in the face of extremism and hypocrisy," Israeli Foreign Minister Avigdor Lieberman told Israel's Army Radio.
Several smaller countries, including some in Latin America, who were absent in 2009 voted against the measure this time. Like last year, Russia and China supported the text, showing big power differences on the issue.
Israel and the United States regard Iran as the Middle East's main proliferation threat. Tehran says its nuclear program is for power generation purposes only.
If it signed the NPT, Israel would have to renounce nuclear weaponry. Arab states say there cannot be genuine peace in the Middle East until Israel abandons nuclear weapons.
"There should be no nuclear power in the Middle East. We need to ensure that the Middle East is free from all nuclear weapons," Arab League Secretary-General Amr Moussa told a news conference during the United Nations General Assembly in New York.
Nuclear expert Mark Hibbs at the Carnegie Endowment for International Peace said the result provided some relief for Israel and showed Washington had "left nothing to chance."
But he added: "The Arabs won't be deterred after their defeat today."
U.S. officials had warned that approval of the resolution would erase any chance of Israel attending an Egyptian-proposed conference in 2012 toward establishing a Middle East zone free of weapons of mass destruction.
After the vote, Israel's head delegate Shaul Chorev said he hoped the "positive spirit" he had seen Friday would prevail.