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(Edits throughout, adds U.S., Jalili, diplomat quotes)

* World powers and Iran meet for first time in over year

* EU’s Ashton says constructive, to meet in Baghdad May 23

* Iran seeks sanctions lifted, defends enrichment activity

* U.S. demands “concrete progress” as “window closing”

By Fredrik Dahl and Justyna Pawlak

ISTANBUL, April 14 (Reuters) – At their first meeting after

a year of sanctions and sabre-rattling over Iran’s nuclear

programme, negotiators from Tehran and six world powers said

“constructive” talks on Saturday meant they would sit down again

together next month.

A deal to reconvene in Baghdad on May 23 had been billed in

advance by diplomats as a mark of a positive resumption and both

Western and Russian negotiators at the talks in Turkey spoke of

a more engaged tone from Iran, whose chief negotiator said he

wanted to talk next about lifting Western sanctions on Tehran.

Washington made clear such a demand was premature, however.

A senior U.S. official in Istanbul spoke of an “urgency … for

concrete progress” as the “window” for diplomacy was closing.

Over the past year, Israeli and U.S. warnings of military

strikes if Iran does not stop working on some aspects of nuclear

technology have stoked fears of war – and raised oil prices – in

an unsettled Middle East. A resumption of the kind of prolonged

dialogue spoken of by both sides could help dampen anxieties.

“We expect that subsequent meetings will lead to concrete

steps towards a comprehensive negotiated solution which restores

international confidence in the exclusively peaceful nature of

the Iranian nuclear programme,” said Catherine Ashton, the EU

foreign policy chief who leads negotiations for the six powers.

The group comprises the five permanent members of the U.N.

Security Council – Russia, the United States, China, France and

Britain – along with Germany. It is known as the P5+1.

Calling Saturday’s talks “constructive and useful”, Ashton

said: “We want now to move to a sustained process of dialogue.”

The meeting in Baghdad, a rare friendly venue for Iranians

in the Arab world, would be part of a “step-by-step” approach.

Junior officials would meet again before May 23, she added.

Chief Iranian negotiator Saeed Jalili, however, made clear

that Iran had no intention of stopping its plants that enrich

uranium to contain 20 percent of fissile material – much higher

than the quality needed to generate electricity, but which

Tehran says is for medical and other uses, not for warheads.

Nonetheless, however remote a final accord may be between

the Islamic republic and its adversaries, a return to the

negotiating table may calm nerves after 15 angry months.

In that time, the West has imposed crippling, new economic

sanctions while Iran, watching its key regional ally Syria

collapse into internal strife, has threatened to blockade oil

tankers. And Israel, fearful a nuclear Iran would jeopardise its

very survival, has planned for possible “pre-emptive” strikes.

One diplomat from the six said Iran’s willingness to at

least discuss its nuclear programme marked a shift away from the

stalemate which marked previous meetings early last year: “We

spent the whole day discussing the nuclear issue.”

Before, when Westerners raised allegations of a secret

weapons programme, “they would have walked away”, the envoy

said, adding negotiators were not “overly optimistic” but

saying: “There is a seriousness to discuss the nuclear issue.”

IRAN SEES PROGRESS

The negotiators for Iran, where the clerical leadership’s

defiant defence of a right to nuclear energy has proven one of

its more popular policies, said they were keen to talk further.

“We witnessed progress. There were differences of opinion,”

chief negotiator Jalili said. “But the points we agreed on were

important.” Asking for talks to include the lifting of sanctions

that have begun to add to widespread hardship in the energy-rich

nation, he said: “The next talks should be based on

confidence-building measures which would build the confidence of

Iranians.”

His defence of 20-percent enrichment did not impress the

United States or others who question the justification and say

that that level of enrichment makes a “break out” to

weapons-grade material much easier and could give Iran the

possibility, if it wanted, to build a nuclear bomb in a year or

two.

Referring to Iran’s rights under the Non-Proliferation

Treaty (NPT) on nuclear weapons, Jalili told a news conference:

“Enrichment of uranium is one of these rights that every

individual member state should benefit from and enjoy for

peaceful purposes.” Western governments argue Iran has broken

the NPT by conducting secret research on nuclear weapons.

While there was little new heard in Istanbul on the

substance of the disputes, the resumption of a process, which

its adversaries hope might let Iran’s leaders perform a

face-saving climbdown and also may stay Israel’s hand, was seen

by observers as favouring the chances of a peaceful outcome.

“Today’s round of P5+1 talks with Iran in Istanbul

established a positive foundation for progress on the nuclear

question. The talks exceeded initial expectations,” said Daryl

Kimball of the Arms Control Association, a Washington-based

research and advocacy group.

“The further high-level and technical talks announced today

are the logical next step to reach agreement on specific,

concrete steps that can help prevent a nuclear-armed Iran.”

WEST WANTS ACTION

Foreign Secretary William Hague said Britain wanted peace:

“Today’s talks were a first step towards that objective, but

there is still a long way to go,” he said. “We now need

agreement on urgent, practical steps to build confidence around

the world that Iran will implement its international obligations

and does not intend to build a nuclear weapon.”

Echoing comments by other diplomats, a senior U.S. official

said the atmosphere had been positive but added: “Now we have to

get down to the hard work.

“The international community expects them to take action.”

As for Jalili’s request for relief from sanctions, the U.S.

official said Washington still expected a European Union oil

embargo take effect on July 1 and that other measures would

continue: “Dialogue is not sufficient for any sanctions relief.

One has to get to get to concrete actions that are significant.”

Deputy Foreign Minister Sergei Ryabkov, who is leading the

Russian delegation, told Interfax news agency: “The atmosphere

is constructive, the conversation is businesslike.”

For supporters of sanctions, the change in approach from

Tehran, which began to discuss renewing negotiations late last

year, may be a vindication of the punishment imposed.

“Given that oil revenue accounts for over half of government

income, the budget will be under significant strain this year as

oil exports fall as a result of sanctions and oil production is

cut back by Iran as its pool of buyers begins to shrink,” said

Dubai-based independent analyst Mohammed Shakeel.

Western officials have made clear their immediate priority

is to persuade 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 signalled some flexibility over limiting its

uranium enrichment to a fissile purity of 20 percent – compared

with the 5 percent level required for nuclear power plants – but

has suggested it is not ready to do so yet.

(Additional reporting by Jonathon Burch and Alexandra Hudson in

Istanbul, Zahra Hosseinian in Zurich, Marcus George in Dubai and

Maria Golovnina and Avril Ormsby in London; Writing by Alastair

Macdonald)