"I understand . . . there may be some room for maneuver possible," a diplomat close to the Vienna-based UN watchdog International Atomic Energy Agency (IAEA) said.

Another diplomat said the Iranians had told Igor Ivanov, head of Russia's Security Council, in Tehran last weekend that they would never agree to giving up on enrichment in Iran but that they were still open to talks.

The Russians, who made no formal proposal, were offering the Iranians a chance to enrich uranium in a joint venture in Russia.

The proposal follows the collapse in August of talks between Iran and Britain, France and Germany after Tehran resumed conversion, the first step in enriching uranium. Iran is holding to a suspension of actual enrichment.

The Europeans want to make sure Tehran does not enrich uranium, which can be used as a fuel for civilian nuclear power plants but also as raw material for atomic bombs.

They are trying to win guarantees that Iran will not make nuclear weapons and are offering Tehran trade, security and other benefits in return.

The Iranians told Ivanov that they would discuss the Russian idea if other nations would consider investing in the Islamic republic's nuclear program, as hardline president Mahmoud Ahmadinejad had proposed at the United Nations in September in order to prove Iran's nuclear intentions were peaceful.

At stake in the short term is whether IAEA chief Mohamed ElBaradei, the current Nobel peace laureate, is to make an 11th-hour trip to Iran to try to restore EU-Iran talks, ahead of an IAEA meeting next week on whether to send the Iranian dossier to the UN Security Council for possible sanctions.

Diplomats said ElBaradei would probably not go if he could not clinch a deal, although one diplomat said the IAEA chief was still willing to travel to Tehran as a mediator for EU negotiators Britain, Germany and France.

On September 24, the IAEA passed a resolution calling on Iran to cease all nuclear fuel work, including conversion, and to cooperate fully in an IAEA investigation into its atomic program.

Moscow is blocking however an IAEA referral of Iran to the Security Council as it staunchly backs Iran's right to a civilian nuclear energy programme, a program Russia has a lucrative hand in developing.

A European diplomat said that ElBaradei would "need a stronger signal to go" to Tehran."

The diplomat said: "What we need to understand is the extent to which there is room for negotiations. This partly depends on what is or is not happening in Isfahan," where Iran is threatening a new cycle of uranium conversion.

Iran started Wednesday a new round of converting uranium ore into the feedstock gas for making enriched uranium, diplomats told AFP.

UN inspectors "are reporting that the first drums of new uranium ore were fed into the process at the uranium conversion facility in Isfahan this morning," a diplomat who asked not to be identified said.

The conversion is a second round after Iran already processed 37 tonnes of ore. Diplomats said the amount of uranium hexafluoride (UF6) gas the Iranians would have after processing what is expected to be 50 tonnes would be enough to make highly enriched uranium for up to 10 atomic bombs.

The European diplomat said "it would be an unhelpful indication if they would re-start" conversion.

The diplomats also said reports that the UF6 is too contaminated to be put into the centrifuges that spin it into enriched uranium were wrong.

"The current batch is good enough for a crash nuclear weapons program, if Iran doesn't mind ruining a lot of centrifuges along the way," a Western diplomat said.

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