MOSCOW World powers and Iran failed to secure a breakthrough at talks on Tehran's nuclear program on Tuesday and set no date for more political negotiations, despite the threat of a new Middle East conflict if diplomacy collapses.
European Union foreign policy chief Catherine Ashton said after two days of talks in Moscow that significant differences remained and the two sides had agreed only on a technical follow-up meeting in Istanbul on July 3.
A deal had not been widely expected and although experts said the sides were far apart, they welcomed the fact talks had at least not broken down completely.
If talks do eventually collapse, financial markets could be hit by fears of war and of higher oil prices because Israel has threatened to attack Iranian nuclear sites to prevent Tehran getting the bomb.
Tehran denies any such aim and says its nuclear program is purely for non-military purposes.
"We set out our respective positions in what were detailed, tough and frank exchanges," Ashton, who led a six-power delegation at the talks, told reporters. "We have begun to tackle critical issues. However, it remains clear that there are significant gaps between the substance of the two positions."
She added: "The choice is Iran's. We expect Iran to decide whether it is willing to make diplomacy work to focus on concrete confidence-building steps, and to address the concerns of the international community."
Iran's chief negotiator, Saeed Jalili, told a separate news conference that he hoped a date would be agreed for new political talks after the Istanbul meeting, which will address unspecified technical details.
He said the talks were more serious than two other meetings since April, but condemned U.N. resolutions that have pressed Iran to suspend nuclear enrichment and Iranian officials at the talks repeatedly denounced international sanctions on Tehran.
"Moving along the constructive path of negotiations and cooperation can bring about a future success of talks," he said.
The six powers - the United States, China, Russia, Germany, France and Britain - say Iran must do more to prove that its program, some of which was concealed from inspectors for years, is truly peaceful and not intended to build weapons.
The so-called P5+1, grouping the five permanent members of the U.N. Security Council plus Germany, want Tehran to stop enriching uranium to levels that bring it close to acquiring weapons-grade material.
They also want it to ship any stockpile out of the country, close down an underground enrichment facility, Fordow, and permit more intrusive United Nations inspections of its work.
Iran for its part wants relief from economic sanctions and an acknowledgement that it has the right to enrich uranium.
"That the Moscow talks ended without a deal doesn't say much about whether there will be one this summer. The Iranian negotiators are extremely tough and, if they make concessions, will only do so at the eleventh hour," said James Acton of the Carnegie Endowment for International Peace think tank.
But the failure to achieve progress towards a deal prompted a swift call for new pressure on Iran by U.S. Republican Senator Mark Kirk, who co-authored U.S. sanctions on Tehran.
"The House and Senate should immediately negotiate a final Iran sanctions bill that can be sent to the President's desk in July," Kirk said, calling for sanctions to be proposed targeting Iran's energy and financial sectors, shipping and insurance.
French Foreign Minister Laurent Fabius echoed the call, saying Paris would continue to step up measures against Tehran.
"Sanctions will continue to be strengthened as long as Iran refuses serious negotiations," Fabius said, adding that the six powers negotiating with Tehran would evaluate their next steps after technical meetings with Iran in July.
A senior U.S. administration official said negotiations on a political level - ones that could yield agreements - would be held only if there were signs Iran was engaging properly in discussions.
"We are not going to get trapped in a process that we think is not a productive one, so we are taking it step by step. We want to see Iran will make a choice to make concrete progress," the official said in the Russian capital.
The Moscow talks follow two rounds of negotiations since diplomacy resumed in April after a 15-month hiatus during which the West cranked up sanctions and Israel repeated its threat to bomb Iranian nuclear sites if diplomacy failed.
Rather than halt enrichment - a process that refines uranium for use as fuel or, if done to a much higher level, nuclear bomb material - Iran has increased its activities.
The P5+1 are wary of making concessions that would let Tehran draw out the talks and gain the time needed to develop nuclear weapons capability. Iran's negotiators want a deal that they can sell at home as a triumph.
An EU embargo on Iranian oil takes full effect on July 1 and new U.S. financial sanctions some days before that. Iran's crude oil exports have fallen by about 40 percent this year, according to the International Energy Agency.
Increasing the pressure, Israel - widely believed to be the only nuclear-armed country in the Middle East - has said time is running out before Iran's nuclear facilities, some of which are deep underground, become invulnerable to air strikes.
"This seems at times to resemble not negotiations but a game of brinkmanship," said Alireza Nader, a senior international policy analyst at Rand Corporation.
"The stakes are high so one would hope that mutual suspicions and expectations will not lead to the collapse of talks and possible military conflict. But at this point it is hard to find much to be optimistic about."
Trita Parsi, president of the National Iranian American Council, tweeted that no one should be surprised there had been no breakthrough but added: "Very costly mistake for all sides."
(Additional reporting by Fredrik Dahl in Vienna, Marcus George in Dubai, Thomas Grove in Moscow; Writing by Timothy Heritage; Editing by Andrew Heavens)