Iran, powers set for high-stakes nuclear talks ISTANBUL (Reuters) - Iran and the six world powers prepared on Friday for rare talks aimed at easing fears that a deepening dispute over the Islamic Republic's nuclear program could plunge the Middle East into a new war. Senior officials from Iran and the big powers arrived in Istanbul ahead of Saturday's bid to restart stalled diplomacy after months of soaring tension and persistent speculation that Israel might bomb Iranian nuclear sites. The meeting is widely seen as a chance for the countries involved in diplomacy - the United States, France, Russia, China, Britain and Germany - and Iran to halt a downward diplomatic spiral and to seek ways out of years of deadlock. Western diplomats have expressed cautious optimism that Iran, which has seen its economically vital oil exports squeezed by increasingly tough sanctions, may finally be ready to discuss curbs to its nuclear program to relieve the pressure. "I don't think they would come if they weren't serious," one diplomat said, adding that a second meeting could take place next month in Baghdad, a location proposed by Iran. But Iran's English-language state television, Press TV, cited sources close to Iran's delegation as saying Tehran saw "few encouraging points" in the remarks of U.S. and European officials. It did not elaborate. The West accuses Iran of seeking to develop a nuclear weapons capability and Israel - believed to be the only Middle East state with an atomic arsenal - has hinted at pre-emptive military strikes to prevent its foe from obtaining such arms. Iran, which has promised to put forward "new initiatives" in Istanbul, says its nuclear program is peaceful and has repeatedly ruled out suspending it. Diplomats and analysts played down any expectations of a major breakthrough in the meeting, but said it might pave the ground for further negotiations to resolve the decade-long row. Western officials have made clear their immediate priority is to convince Tehran to cease the higher-grade uranium enrichment it began in 2010. It has since expanded that work, shortening the time it would need for any weapons "break-out." Iran has signaled some flexibility over halting its enrichment to a fissile purity of 20 percent - compared with the 5 percent level required for nuclear power plants - but also suggests it is not ready to do so yet. The talks "will begin a very complex negotiation, and for several months diplomacy will take some pressure off oil prices and help keep the chance of Israeli strikes very low," said Cliff Kupchan, a Middle East analyst at the Eurasia Group. But in the end, Kupchan said, renewed diplomacy is unlikely to yield a resolution to the crisis, which has helped push global oil prices higher this year. If Iran were to accept scaling back its uranium enrichment program, it would probably expect to be rewarded with a relaxation of sanctions, for example the lifting of an EU oil embargo due to take effect in less than three months time. But one Western official appeared to dismiss this. That decision is taken. We would expect the oil embargo to come into force on July 1 and it would be a surprise if Iran did something that merited moving on that. Iran's deputy negotiator Ali Baqeri held separate talks with senior Chinese and Russian officials in Istanbul, and the six powers met internally to coordinate tactics. Under Secretary of State for Political Affairs Wendy Sherman headed the U.S. delegation. The formal talks between Jalili and European Union foreign policy chief Catherine Ashton, the powers' main representative, will get under way on Saturday, but Ashton and Iranian chief nuclear negotiator Saeed Jalili will meet over dinner on Friday. The last time the two sides met, also in Istanbul in January last year, they could not even agree an agenda. This time, both sides signaled in the run-up to Saturday's discussions their intent to give diplomacy a real chance. "We hope that this first round will produce a conducive environment for concrete results through a sustained process," Ashton's spokesman, Michael Mann, said in an email. Iranian Foreign Minister Ali Akbar Salehi, in a rare opinion piece in a U.S. newspaper, said his country hoped that all sides would commit to comprehensive dialogue and that negotiators make "genuine efforts to re-establish confidence and trust." Defying intensifying sanctions, Iran has continued to expand its uranium enrichment program - activity which can have both energy and weapons purposes - and experts say it now has enough material for four atomic bombs if processed much further. Mark Fitzpatrick, a director of the International Institute for Strategic Studies think-tank, said getting Iran to halt 20 percent enrichment would be an interim goal "to put a lid on the most troublesome" aspect of Iran's nuclear program. A long-term deal will have to "provide confidence that Iran cannot quickly produce nuclear weapons," he told Reuters, adding this would require both better monitoring of Iran's nuclear work and limits on its uranium enrichment and stockpiles. Additional reporting by Zahra Hosseinian, Jonathon Burch, Alexandra Hudson, Ayla Jean Yackley and Ece Toksabay; Editing by Mark Heinrich