"Negotiations are taking place to iron out some technical issues. We hope that the protocol will be signed very shortly either in Tehran or Moscow," the envoy Gholamreza Shafei was quoted as saying by the ITAR-TASS news agency.

Russia is building the Islamic state's first nuclear power reactor, but says it will not begin delivering nuclear fuel needed to operate the plant until Tehran signs a deal pledging to return the spent material to Russia.

Under pressure from the United States and Israel -- which fear that Iran is developing nuclear weapons -- Russia has made the return of the spent fuel a key condition for concluding the 800 million dollar (715 million euro) project.

Moscow officials assert that negotiations over the Bushehr plant have broken down over Iran's demand for Russia to buy back the spent fuel.

The request is highly unusual since spent fuel in such deals is almost always sent back for free, and the Iranian demand was not part of the original Bushehr contract.

Some observers say that Moscow is deliberately dragging its feet to pressure Iran to come clean with UN inspectors over its nuclear programme.

The Bushehr plant is due to go online in 2005 and the United States has been pressing Russia strongly not to sign an accord.

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