U.N. nuclear inspector in Iran for talks

TEHRAN (Reuters) - A top U.N. nuclear watchdog official began talks in Iran on Thursday aimed at improving cooperation with the International Atomic Energy Agency over Tehran's nuclear program.

Diplomats in Vienna, where the IAEA is based, said the visit was a fresh effort to extract Iranian clarifications about intelligence reports suggesting it illicitly tried to design atomic bombs. Iran insists its nuclear work is peaceful.

"The two parties will assess the trend of cooperation between Iran's Atomic Energy Organization and the IAEA," the official Iranian news agency IRNA said.

It said Olli Heinonen, the IAEA's deputy director in charge of inspections, would hold talks in Tehran on Thursday and Friday. An IAEA official said Heinonen was expected back in Vienna early on Saturday.

Western capitals have said Iran now faces a new round of U.N. sanctions after it failed to respond positively by an informal deadline last weekend to an enhanced offer of incentives from six world powers aimed at ending the dispute.

They proposed that Iran freeze any expansion of its nuclear work in return for a halt to further U.N. sanctions. Three other rounds of penalties have been imposed since 2006.

The freeze idea was aimed at getting preliminary talks going as a stepping stone towards formal negotiations on a package of nuclear, trade and other incentives. However, Iran would have to suspend uranium enrichment entirely for negotiations to start.

Iran has refused to halt enrichment, which it says is aimed only at generating electricity. It has also given no indication that it is ready for a freeze. It has promised to give a "clear response" to the sextet's offer at an unspecified date.

Diplomats in Vienna played down speculation that Heinonen was on a special mission to verify the current level of Iranian enrichment activity, noting Iran had given no apparent sign of openness to the "freeze for freeze" idea.

Enrichment is the part of Iran's work that most worries the West because it can be used to yield fuel for power plants or, if the process is adjusted, material for nuclear warheads.

In its most recent quarterly report on Iran, the IAEA said in May that alleged Iranian research into nuclear warheads was a "serious concern" and Tehran should provide more explanation of questionable missile-related activities.

Two weeks ago, Irans' atomic energy director said after talks with IAEA officials in Vienna he believed it was not the agency's business to delve into those allegations. He said Iran would deal with them in other ways, without elaborating.

A senior Western diplomat accredited to the U.N. watchdog said Heinonen felt the issue was "very much unfinished business", contrary to Iranian assertions.

"Heinonen's trip appears designed to crack out understandings about what happens next in addressing questions that require answers," he told Reuters.

The next IAEA report on Iran is due in mid-September.

(Reporting by Hashem Kalantari in Tehran and Mark Heinrich in Vienna, writing by Edmund Blair; editing by Andrew Roche)