By Justyna Pawlak and Yeganeh Torbati
MOSCOW (Reuters) - World powers and Iran failed to secure a breakthrough at talks on Tehran's nuclear program on Tuesday and set no date for more political negotiations, despite the threat of a new Middle East conflict if diplomacy collapses.
European Union foreign policy chief Catherine Ashton said after two days of talks in Moscow that significant differences remained and that the two sides had agreed only on a technical follow-up meeting in Istanbul on July 3.
If talks fail, financial markets could be hit by fears of conflict in the Middle East and of higher oil prices because Israel has threatened to attack Iranian nuclear sites if diplomacy fails to stop Iran getting the bomb. Tehran denies any such aim and says its nuclear program is purely for non-military purposes.
"We set out our respective positions in what were detailed, tough and frank exchanges," Ashton, who led a six-power delegation at the talks, told reporters. "We have begun to tackle critical issues. However, it remains clear that there are significant gaps between the substance of the two positions."
She added: "The choice is Iran's. We expect Iran to decide whether it is willing to make diplomacy work to focus on concrete confidence-building steps, and to address the concerns of the international community."
Iranian's chief negotiator, Saeed Jalili, told a separate news conference that he hoped a date would be agreed for new political talks after the Istanbul meeting, which will address unspecified technical details.
He said the Moscow talks had been more serious and realistic than previous negotiations but also condemned U.N. resolutions punishing Iran over its nuclear program and reiterated that Tehran's aim was not to secure an atomic arsenal.
"Moving along the constructive path of negotiations and cooperation can bring about a future success of talks," he said.
The six powers - the United States, China, Russia, Germany, France and Britain - fear Iran wants to build nuclear arms and say it must do more to prove that its program, some of which was concealed from inspectors for years, is truly peaceful.
The so-called P5+1, grouping the five permanent members of the U.N. Security Council plus Germany, want Tehran to stop enriching uranium to levels that bring it close to acquiring weapons-grade material.
They also want it to ship any stockpile out of the country, close down an underground enrichment facility, Fordow, and permit more intrusive United Nations inspections of its work.
Iran for its part has demanded relief from economic sanctions and an acknowledgement that it has the right to enrich uranium.
The Moscow talks follow two rounds of negotiations since diplomacy resumed in April after a 15-month hiatus during which the West cranked up sanctions and Israel repeated its threat to bomb Iranian nuclear sites if diplomacy failed.
A series of United Nations Security Council resolutions since 2006 have demanded Iran suspend all its enrichment-related activities.
Rather than halt enrichment - a process that refines uranium for use as fuel or, if done to a much higher level, nuclear bomb material - Iran has increased its activities.
The P5+1 are wary of making concessions that would let Tehran draw out the talks and gain the time needed to develop nuclear weapons capability. Iran's negotiators want a deal that they can sell at home as a triumph.
An EU embargo on Iranian oil takes full effect on July 1 and new U.S. financial sanctions some days before that. Iran's crude oil exports have fallen by some 40 percent this year, according to the International Energy Agency [ID:nL5E8HD4JG].
Increasing the pressure, Israel - widely believed to be the only nuclear-armed country in the Middle East - has said time is running out before Iran's nuclear facilities, some of which are deep underground, become invulnerable to air strikes.
(Additional reporting by Fredrik Dahl in Vienna, Marcus George in Dubai, Thomas Grove in Moscow; Writing by Timothy Heritage; Editing by Kevin Liffey)