Iran, powers aim to seal deal on ending nuclear standoff GENEVA (Reuters) - Iran and six world powers were closing in on a long-elusive deal on Friday aimed at allaying international fears about Tehran's atomic aims and reducing the risk of a new war in the volatile Middle East. After the first day of a November 7-8 meeting, they said progress had been made towards an agreement under which the Islamic state would curb some of its nuclear activities in exchange for limited relief from sanctions that are damaging its economy. Negotiators cautioned, however, that work remained to be done in the coming hours in very complex negotiations and that a successful outcome was not guaranteed. Iran rejects Western accusations that it is seeking the capability to make nuclear weapons. Iranian Deputy Foreign Minister Abbas Araqchi said it was too early to say with certainty whether a deal would be possible this week, though he voiced cautious optimism. I'm a bit optimistic. The fact that an agreement may finally be within reach after a decade of frustrated efforts and mutual hostility between Iran and the West was a sign of a dramatic shift in Tehran's foreign policy since the election of a relative moderate, Hassan Rouhani, as Iranian president in June. The United States and its allies are aiming for a "first step" deal that would stop Iran from further expanding a nuclear program that it has steadily built up in defiance of tightening international pressure. The Islamic Republic, which holds some of the world's largest oil and gas reserves, wants them to lift increasingly tough punitive measures that have slashed its daily crude sales revenue by 60 percent in the last two years. Lending urgency to the need for a breakthrough soon, a U.S. Senate committee said it would pursue a package of tough new sanctions on Iran after the current Geneva talks end on Friday. President Barack Obama has been pushing Congress to hold off on more sanctions against Iran, demanded by its arch-enemy Israel, to avoid undermining the diplomacy aimed at defusing fears of an Iranian advance towards nuclear arms capability. A spokesman for the European Union foreign policy chief - who is presiding over the talks - said on Thursday evening that the powers and Iran were "making progress" towards easing the decade-long standoff. Michael Mann said EU foreign policy chief Catherine Ashton would meet Iran's foreign minister and chief negotiator, Mohammad Javad Zarif, on Friday morning "to allow more time to work through some issues." Diplomats from the six nations would also meet early on Friday to prepare Ashton's talks with Zarif. Zarif told Reuters earlier in the day: "I'm hopeful that we can move forward. But he said he hoped the sides would agree a joint statement on Friday stipulating a goal to be reached "within a limited period of time, hopefully in less than a year," and a series of reciprocal actions they would take "to build confidence and address their most immediate concerns. But its refusal to halt activity which can also have military applications has drawn the increasingly tough sanctions. Iran and the United States have had no diplomatic ties since soon after the 1979 Islamic Revolution that overthrew the U.S.-backed monarchy, and their mutual mistrust and enmity has posed the biggest obstacle to any breakthrough nuclear accord. White House spokesman Jay Carney said that in exchange for "concrete, verifiable measures" of restraint by Iran, the six powers "would consider limited, targeted, and reversible relief that does not affect our core sanctions architecture." The broader sanctions regime would stay pending a "final, comprehensive, verifiable" accord, Carney told reporters In Washington. If Iran did not follow through towards this end, modest sanctions relief could be reversed and stiffer penalties imposed. The U.S. Senate Banking Committee chairman declared the panel was moving forward on a proposal for new sanctions, a step likely to please Israel which has campaigned against compromise proposals under discussion in Geneva, describing them as potentially "a mistake of historic proportions." Senator Tim Johnson, a Democrat, said Senate Majority Leader Harry Reid instructed him to bring the bill closer to a vote by the full Senate by calling for a debate on it. Araqchi, the Iranian deputy foreign minister, said after the morning meetings that he hoped a deal could be struck but "the differences are widespread and deep. The Iranian delegation held a series of meetings - one with all three European delegations, then, separately, with the Russians, the Chinese and the Americans. Araqchi met for an hour with U.S. delegation chief Wendy Sherman, under secretary of state for political affairs, in a meeting that a senior State Department official described as a "substantive and serious conversation." "It remains our assessment that Iran would need at least one year to acquire one nuclear weapon from the time that Iran decides to pursue one," Carney said, describing the U.S. view of a potential "breakout move" by Tehran toward building an atomic bomb. In other words, we would be essentially buying time. The exact nature of a possible first step remain unclear. A U.S. official said Iran at this stage must address important aspects of its nuclear activity, including more intrusive U.N. inspections. Iran's construction of a research reactor near the town of Arak is also a growing concern for the West because of its potential to yield plutonium for bombs. During that time Washington would offer Tehran, among other things, relaxed restrictions on Iranian funds held in overseas accounts. Additional reporting by Justyna Pawlak and Yeganeh Torbati in Geneva, Timothy Gardner in Washington,; Marcus George in Dubai, Michelle Nichols in New York; Editing by Mohammad Zargham