Big powers resumed talks on Wednesday on a preliminary deal to curb Iran's nuclear program with Russia and Britain confident a breakthrough could be clinched and Iran spelling out "red lines" but saying it wanted friendly ties with all nations.
Keen to end a long standoff and head off the risk of a wider Middle East war, the United States, Russia, China, France, Britain and Germany came close to winning concessions from Tehran on its nuclear activity in return for some sanctions relief at negotiations in Geneva earlier this month.
Policymakers from the six nations have since said an interim accord on confidence-building steps could finally be within reach, despite warnings from diplomats that differences persist and could still foil an agreement.
British Foreign Secretary William Hague said the remaining gaps were narrow. "It is the best chance for a long time to make progress on one of the gravest problems in foreign policy," he told a news conference during a visit to Istanbul.
Russian Foreign Minister Sergei Lavrov said earlier: "We hope the efforts that are being made will be crowned with success at the meeting that opens today in Geneva."
Chinese Deputy Foreign Minister Li Baodong, head of China's delegation in Geneva, told Reuters: "Things are on track."
Western governments suspect Iran has enriched uranium with the covert aim of developing the means to fuel nuclear weapons, which Tehran denies. Refined uranium is used to run nuclear power stations - Iran's stated goal - but cam also constitute the core of a nuclear bomb, if enriched to a high degree.
Iranian Supreme Leader Ayatollah Ali Khamenei said in a speech as Western negotiators gathered in the Swiss city that the Islamic Republic would not step back from its nuclear rights and he had set "red lines" for his envoys in Geneva.
But he added, according to his official website: "We want to have friendly relations with all nations and peoples. The Islamic system isn't even hostile to the nation of America, although with regards to Iran and the Islamic system, the American government is arrogant, malicious and vindictive."
Khamenei also criticized France, which spoke out against a draft deal floated at the November 7-9 round, for "succumbing to the United States" and "kneeling before the Israeli regime". France said the comments were unacceptable.
Israeli Prime Minister Benjamin Netanyahu flew to Russia on Wednesday to appeal for tougher terms in any accord with Iran after failing to convince the United States that the world powers are pursuing a bad deal.
Israel, assumed to have the Middle East's only nuclear arsenal, sees a nuclear-armed Iran as a mortal threat and wants its arch-enemy's uranium enrichment capabilities dismantled and its enriched uranium stockpile removed.
Israel worries that the interim deal being discussed in Geneva would buy Iran time to pursue nuclear weapons because it would not scrap its nuclear fuel-making infrastructure, while the six powers see it as placing a ceiling on Iran's nuclear activity as a stepping stone towards a broad final settlement.
White House deputy national security adviser Ben Rhodes sought to allay Israeli misgivings, saying negotiators needed the six months an interim solution would provide to strike an comprehensive agreement.
"What we have said to the Israelis is that we have this tactical difference with you on pursuing this first step, but we share the end goal, and that's the point of these whole negotiations, which is to prevent Iran getting nuclear weapons," he told CNN.
The last meeting stumbled over Iran's insistence that its "right" to enrich uranium be explicitly recognized and over its building of a heavy-water reactor near Arak that could yield plutonium, an alternative bomb fuel, once operational.
Iranian Foreign Minister Mohammad Javad Zarif has since suggested a way around the first sticking point, saying Tehran has the right to refine uranium but is not now insisting others recognize that right.
A U.N. inspector report last week showed Iran had stopped expanding enrichment and had not added major new components at Arak since August, when moderate Hassan Rouhani replaced hardliner Mahmoud Ahmadinejad as president.
Nuclear analyst Ali Vaez of the International Crisis Group think-tank said the "body language" showed that the sides were ready for a deal, pointing to Iran slowing its nuclear push and Washington refraining, so far, from imposing more sanctions.
"(They) have demonstrated that they are looking to transform stumbling blocks into stepping stones," Vaez said.
Zarif, Tehran's chief nuclear negotiator, said on the eve of the meeting there was "every possibility" of a successful conclusion provided there was good faith and the political will among all involved to resolve problems.
U.S. President Barack Obama sounded a more cautious note on Tuesday, saying prospects for an imminent deal were uncertain.
American lawmakers urged the Obama administration on Tuesday to take a tougher line with Iran.
The talks started on Wednesday with a meeting between Zarif and European Union foreign policy chief Catherine Ashton, who coordinates contacts with Iran on behalf of the powers.
Zarif said their discussion was "good and useful" but gave no details. Senior diplomats from the six nations were due to join him and Ashton later in the day for a plenary session.
After years of confrontation, a shift towards meaningful diplomacy between Iran and the world powers took shape after Rouhani's landslide election victory on a platform to relieve the Islamic Republic's increasing international isolation and get sanctions strangling its oil-dependent economy lifted.
Rouhani wants to move quickly: Western sanctions have reduced Iran's daily oil export revenue by 60 percent since 2011 and caused its currency to collapse.
But diplomats say Iran has so far refused to meet all of the powers' demands. They include suspending enrichment of uranium to 20 percent fissile purity - a significant advance toward the threshold for bomb fuel - as well as limiting its enrichment capacity and mothballing the Arak reactor project.
Western diplomats have kept much of the details of a preliminary deal under wraps but said this would not win Iran relief from the most painful sanctions on oil trade and banking that many believe finally forced it into serious negotiations.
Under an initial deal the OPEC producer is likely to temporarily regain access to precious metals markets and trade in petrochemicals, an important source of export income, and could see the release of some of its oil revenues frozen in oversees accounts.
The Iranian assets that would be unfrozen as part of any deal this week would amount to less than $10 billion, U.S. national security adviser Susan Rice told CNN.
Additional reporting by Louis Charbonneau, John Irish and Fredrik Dahl in Geneva, Marcus George and Isabel Coles in Dubai, Steve Gutterman in Moscow, Dan Williams in Jeruselem, Sophie Louet in Paris, David Brunnstrom in Washington and Dasha Afanasieva in Istanbul; Editing by Mark Heinrich