WASHINGTON (Reuters) - Major powers and Iran are getting closer to an initial agreement to curb Iran's nuclear program, a senior U.S. official said on Friday, adding it is "quite possible" a deal could be reached when negotiators meet November 21-22 in Geneva.
"I don't know if we will reach an agreement. I think it is quite possible that we can, but there are still tough issues to negotiate," the official, who spoke on condition of anonymity, told reporters.
The official said EU foreign policy chief Catherine Ashton and Iranian Foreign Minister Javad Zarif were to meet on November 20 in Geneva and a wider group known as the P5+1 - comprised of Britain, China, France, Germany, Russia and the United States - would meet Iranian officials there on the following two days.
The talks next week aim to finalize an interim deal to allow time to negotiate a permanent agreement with Iran that would end a 10-year deadlock and provide assurances to the six powers that its atomic program would not produce bombs.
Iran has denied that it is seeking the capability to produce atomic weapons and insists its nuclear ambitions are limited to the peaceful generation of electricity and other civilian uses.
Negotiations last week in Geneva ended without an agreement as the sides worked to defuse their standoff over Iran's nuclear program, which the United States and many of its allies suspect is designed to develop nuclear weapons.
U.S. President Barack Obama has urged skeptical U.S. lawmakers not to impose new sanctions on Iran while negotiations are ongoing and called for a pause in U.S. sanctions to see if diplomacy can work.
The senior U.S. official told reporters that published estimates of direct sanctions relief being offered under a preliminary deal - which have ranged from $15 billion to $50 billion - were "wildly exaggerated."
"It is way south of all of that and quite frankly it will be dwarfed by the restrictions that are still in place," the official said, saying to impose further sanctions threatened the negotiations not only with Iran but also among the six major powers.
"The P5+1 believes these are serious negotiations. They have a chance to be successful," the official said. "For us to slap on sanctions in the middle of it, they see as bad faith."
Oil prices slipped lower on Friday on the reports that Western powers may reach a deal.
Commenting on a U.N. inspection report released on November 14 that said Iran had stopped expanding its uranium enrichment capacity, the official said it was "a good thing" but did not resolve fundamental questions and concerns about Tehran's nuclear program.
"We appreciate the step but the reason for our negotiation is to get at certainty that Iran can't have a nuclear weapon and we are a long way from that," the official added.
Western diplomats said one of the sticking points during talks was Iran's argument that it retains the "right" to enrich uranium. The United States argues Iran does not intrinsically have that right under the Nuclear Non-Proliferation Treaty.
The official dismissed suggestions that the issue could be a deal breaker. "I think there is a way to navigate that ... we each understand where each other is and what is possible, and what is not," the official added.
Reporting by Lesley Wroughton; Editing by Philip Barbara and Jim Loney