* Deal halts Iran nuclear progress, U.S. says
* Agreement follows marathon talks in Geneva
* "This is only a first step" - Iran minister
* Most sanctions to remain in place -Kerry (Adds quotes, details on agreement, analyst)
By Parisa Hafezi and Justyna Pawlak
GENEVA, Nov 24 (Reuters) - Iran and six world powers reacheda breakthrough deal early on Sunday to curb Tehran's nuclearprogramme in exchange for limited sanctions relief, in whatcould be the first sign of an emerging rapprochement between theIslamic state and the West.
Aimed at ending a dangerous standoff, the agreement between Iran and the United States, France, Germany, Britain, China andRussia was nailed down after more than four days of tortuousnegotiations in the Swiss city of Geneva.
Halting Iran's most sensitive nuclear work, it was designedas a package of confidence-building steps to ease decades oftensions and confrontation and banish the spectre of a MiddleEast war over Tehran's nuclear aspirations.
European Union foreign policy chief Catherine Ashton, whohas been coordinating talks with Iran on behalf of the majorpowers, said it created time and space for talks aimed atreaching a comprehensive solution to the dispute.
"This is only a first step," Iranian Foreign MinisterMohammad Javad Zarif told a news conference. "We need to startmoving in the direction of restoring confidence, a direction inwhich we have managed to move against in the past."
In Washington, U.S. President Barack Obama said that if Irandid not meet its commitments during a six-month period, theUnited States would turn off sanctions relief and "ratchet upthe pressure."
But Israeli Prime Minister Benjamin Netanhayu's governmentdenounced the agreement as "a bad deal" that Israel did notregard itself as bound by.
Before Sunday's agreement, Israel, believed to be the MiddleEast's only nuclear power, said the deal being offered wouldgive Iran more time to master nuclear technology and amasspotential bomb fuel.
The West fears that Iran has been seeking to develop anuclear weapons capability. The Islamic Republic denies that,saying its nuclear programme is a peaceful energy project.
The United States said the agreement halted progress onIran's nuclear programme, including construction of the Arakresearch reactor, which is of special concern for the West as itcan yield potential bomb material.
It would neutralise Iran's stockpile of uranium refined to afissile concentration of 20 percent, which is a close step awayfrom the level needed for weapons, and calls for intrusive U.N.nuclear inspections, a senior U.S. official said.
Iran has also committed to stop uranium enrichment above afissile purity of 5 percent, a U.S. fact sheet said.
Refined uranium can be used to fuel nuclear power plants -Iran's stated goal - but also provide the fissile core of anatomic bomb if refined much further.
REVERSIBLE SANCTIONS RELIEF
Diplomacy with Iran was stepped up after the landslideelection of Hassan Rouhani, a relative moderate, as Iranianpresident in June, replacing bellicose nationalist MahmoudAhmadinejad.
Rouhani aims to mend fences with big powers and getsanctions lifted. He obtained crucial public backing fromSupreme Leader Ayatollah Ali Khamenei, keeping powerful hardlinecritics at bay.
On a Twitter account widely recognised as representingRouhani, a message said after the agreement was announced,"Iranian people's vote for moderation & constructive engagement+ tireless efforts by negotiating teams are to open newhorizons."
The Geneva deal has no recognition of an Iranian right toenrich uranium and sanctions would still be enforced, the U.S.official said.
But Iranian Deputy Foreign Minister Abbas Araqchi saidIran's enrichment programme had been officially recognised.
U.S. Secretary of State John Kerry said the agreement wouldmake it harder for Iran to make a dash to build a nuclear weaponand would make Israel and other U.S. allies safer.
Kerry also told a news conference that while Obama would nottake off the table the possible use of force against Iran, hebelieved it was necessary first to exhaust diplomacy.
He said the limited sanctions relief could be reversible.
After Ashton read out a statement on the deal to the camerasat the United Nations in Geneva, ministers appeared elated.Ashton and Kerry hugged each other, and Kerry and RussianForeign Minister Sergei Lavrov shook hands. Minutes later, asthe Iranian delegation posed for photos, Zarif and FrenchForeign Minister Laurent Fabius approached each other and embraced.
A White House fact sheet detailed what Iran could obtain:
- Potential access to $1.5 billion in revenue from trade ingold and precious metals and the suspension of some sanctions onIran's auto sector, and its petrochemical exports;
- Allow purchases of Iranian oil to remain at theircurrently significantly reduced levels. "$4.2 billion from thesesales will be allowed to be transferred in instalments if, andas, Iran fulfils its commitments," the fact sheet said;
- License safety-related repairs and inspections inside Iranfor certain Iranian airlines.
Most of the sanctions, Kerry said, would remain in place.
"The approximately $7 billion in relief is a fraction of thecosts that Iran will continue to incur during this first phaseunder the sanctions that will remain in place," the White Housesaid. "The vast majority of Iran's approximately $100 billion inforeign exchange holdings are inaccessible or restricted."
Kerry and the foreign ministers of the five other worldpowers joined the negotiations with Iran early on Saturday asthe two sides appeared to be edging closer to a long-soughtpreliminary agreement.
The Western powers' goal was to cap Iran's nuclear energyprogramme, which has a history of evading U.N. inspections andinvestigations, to remove any risk of Tehran covertly refininguranium to a level suitable for bombs.
British Foreign Secretary William Hague said in a Twittermessage that it was an "important and encouraging" first-stage agreement with Iran, whose nuclear programme "won't move forwardfor 6 months and parts rolled back."
France's Fabius said, "After years of blockages, theagreement in Geneva on Iran's nuclear programme is an importantstep to preserving security and peace."
Tehran, whose oil-dependent economy has been severelydamaged by tightening Western sanctions over the past few years,denies it would ever "weaponise" enrichment.
The OPEC producer rejects suspicions it is trying covertlyto develop the means to produce nuclear weapons, saying it isstockpiling nuclear material for future atomic power plants.
"This is the first time in 33 years that Washington andTehran have concluded a formal agreement. Even six months ago,few would have imagined this outcome," said senior fellowSuzanne Maloney of the Saban Center for Middle East Policy atBrookings.
(Additional reporting by Stephanie Nebehay, Fredrik Dahl, JohnIrish, Arshad Mohammed, Louis Charbonneau in Geneva, KatyaGolubkova in Moscow, Isabel Coles in Dubai; Writing by FredrikDahl; Editing by Peter Cooney)
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