* Iran official says will not send stockpile out of country
* Signals flexibility on other aspects of nuclear programme
* Comments may be "pre-negotiating posturing" - analyst
* Iran and world powers to meet in Geneva on Tuesday
By Yeganeh Torbati and Fredrik Dahl
DUBAI/VIENNA, Oct 13 (Reuters) - Iran on Sunday rejected theWest's demand that it send sensitive nuclear material out of thecountry but signalled flexibility on other aspects of its atomicactivities that worry world powers, ahead of renewednegotiations this week.
Talks about Iran's nuclear programme, due to start in Genevaon Tuesday, will be the first since the election of IranianPresident Hassan Rouhani, who has tried to improve relationswith the West to pave the way for lifting economic sanctions.
Rouhani's election in June to succeed Mahmoud Ahmadinejadhas raised hopes of a negotiated solution to a decade-olddispute over Iran's nuclear programme that could otherwisetrigger a new war in the volatile Middle East.
Iranian Deputy Foreign Minister Abbas Araqchi's comments onSunday may disappoint Western officials, who want Iran to shipout uranium enriched to a fissile concentration of 20 percent, ashort technical step away from weapons-grade material.
However, Araqchi, who will join the talks in Switzerland,was less hardline about other areas of uranium enrichment, whichTehran says is for peaceful nuclear fuel purposes but the Westfears may be aimed at developing nuclear weapons capability.
"Of course we will negotiate regarding the form, amount, andvarious levels of (uranium) enrichment, but the shipping ofmaterials out of the country is our red line," he was quoted assaying on state television's website.
In negotiations since early 2012, world powers have demandedthat Iran suspend 20-percent enrichment, send some of itsexisting uranium stockpiles abroad and shutter the Fordowunderground site, where most higher-grade enrichment is done.
In return, they offered to lift sanctions on trade in gold,precious metals and petrochemicals but Iran, which wants oil andbanking restrictions to be removed, has dismissed that offer. Itsays it needs 20-percent uranium for a medical research reactor.
However, Araqchi's statement may be "the usualpre-negotiation posturing", said Middle East specialist ShashankJoshi at the Royal United Services Institute (RUSI) in London.
"It is easy to imagine a compromise whereby Iran would shipout only some of its uranium, allowing the negotiating team toclaim a victory. There are many potential compromises that willbe explored," Joshi told Reuters.
Cliff Kupchan, a director and Middle East analyst at riskconsultancy Eurasia Group, took a similar line, saying Iran wasseeking to gain leverage ahead of negotiations.
"Still, it is sobering that a lead Iranian negotiator issetting red lines so early. These are going to be tough talks."
Since the Islamic Republic started started making 20-percent uranium gas in 2010 it has produced more than the 240-250 kg(530-550 pounds) needed for one atomic bomb, which Israel hassuggested may provoke it to take military action against Iran.
Iran has kept its stockpile below this figure by convertingsome of it into oxide powder for reactor fuel, potentiallybuying more time for diplomacy, U.N. watchdog reports show.
But it has also amassed stocks of low-enriched uranium gasthat experts say would be enough for several bombs if processedmuch further to weapons-grade material. It has also sharplyexpanded its enrichment capacity in recent years.
Israel, which has threatened preemptive military action ifit deems diplomacy a dead end, demands the total removal ofTehran's enriched uranium stockpiles along with a dismantling ofits enrichment facilities.
U.S. Secretary of State John Kerry said in London on Sunday"the window for diplomacy is cracking open", in comments viasatellite to the American Israel Public Affairs Committee summitin California.
"But I want you to know that our eyes are open, too. Whilewe seek a peaceful resolution to Iran's nuclear programme, wordsmust be matched with actions," he added.
"In any engagement with Iran, we are mindful of Israel'ssecurity needs."
Iran says it will never give up its right to refine uraniumand Western experts acknowledge it may no longer be realistic toexpect Iran to suspend all such work, as demanded by a series ofU.N. Security Council resolutions since 2006.
Instead, they say, Iran's enrichment capacity should bescaled back in order to make it more difficult for the countryto launch any weapons bid without being detected in time.
R. Scott Kemp, an assistant professor of nuclear science andengineering at the Massachusetts Institute of Technology, saidthat merely capping Iran's nuclear programme was unlikely toprovide enough confidence in the West.
"Some rollback of the programme ... is really the only pathto confidence and stability," Kemp wrote in a blog last week.
David Albright, of the Institute for Science andInternational Security think-tank, told a U.S. Senate committeein early October, referring to machines used to refine uranium:"Any future nuclear agreement must include a limit on the numberand type of centrifuges Iran can install."
- Commodity Markets
- Politics & Government