Iran is signaling a possible compromise offer heading into critical talks with world powers deeply suspicious of its nuclear program: offering to scale back uranium enrichment but not abandon the ability to make nuclear fuel.

The proposal _ floated by the country's nuclear chief as part of the early parrying in various capitals before negotiations get under way Friday _ suggested that sanctions-battered Iran is ready to bargain.

But this gambit, at least, appeared to fall short of Western demands that Iran hand over its most potent nuclear material and ease a standoff that has rattled nerves and spooked markets with seesaw oil prices and threats of Israeli military strikes.

"It is important for Iran to understand that the window is closing and that these talks are an opportunity," White House press secretary Jay Carney said Monday. "The decision rests with Iran."

The talks involving Iran and the five permanent U.N. Security Council nations plus Germany, to be held in Istanbul, are the first direct negotiations on Tehran's nuclear program since a swift collapse more than 14 months ago.

Despite far-reaching complexities, the dispute effectively boils down to one issue: Iran's stated refusal to close down its uranium enrichment labs.

For Iran, uranium enrichment is a proud symbol of its scientific advances and technological self-sufficiency. Iran's president, Mahmoud Ahmadinejad, called the nuclear program on Sunday "a locomotive" for other showcase projects such as Iran's space effort.

The U.S. and its allies contend that the same sites that make fuel for reactors could also eventually churn out weapons-grade material. Iran has repeatedly insisted that its nuclear program is for peaceful purposes only.

The ideas put forth late Sunday by the nuclear chief, Fereidoun Abbasi, are an attempt to at least acknowledge this huge divide.

Abbasi said Tehran could eventually stop its production of the 20 percent enriched uranium needed for a research reactor, used for medical research and treatments. But, he added, Iran would continue enriching uranium to lower levels of about 3.5 percent for power generation.

The framework addresses one key Western concern. The U.S. and others worry the higher-enriched uranium could be turned into warhead strength _ more than 90 percent enriched _ in a matter of months.

Yet Abbasi also directly snubbed a demand backed by the U.S. and some other countries. They want Iran's stockpile of 20 percent-enriched uranium to be transferred out of the country. Abbasi indicated that it would remain in Iran.

"Such a stockpile could enable Iran to make a bomb in the future, should it decide to do so," said Meir Javedanfar, an Iranian-born political analyst now based in Israel.

"Unless an agreement is reached whereby this stockpile is transferred abroad for conversion into nuclear fuel or, at the very minimum, placed under international supervision in an another country, it will be very difficult for the (world powers) to accept Iran's current offer," he said.

The U.S. and its allies have sought to press Iran to suspend uranium enrichment in exchange for receiving reactor-ready fuel from abroad. Iran has pushed back by refusing to curtail enrichment, which is permitted under the U.N. treaty overseeing the spread of nuclear technology.

Last week, U.S. Secretary of State Hillary Rodham Clinton said it was up to Iran to show that its claim of rejecting nuclear weapons is "not an abstract belief but it is a government policy."

"And that government policy can be demonstrated in a number of ways, by ending the enrichment of highly enriched uranium to 20 percent, by shipping out such highly enriched uranium out of the country, by opening up to constant inspections and verifications," she said at a conference in Istanbul to seek ways to aid opposition forces in Syria _ Iran's main Arab ally.

Clinton will not be attending Friday's conference on Iran. The State Department's third-ranking diplomat, Under Secretary of State for Political Affairs Wendy Sherman, will lead the U.S. delegation. The Iranians have not yet announced whom they will be sending to Istanbul.

Abbasi also insisted that Iran will never close down its new underground enrichment facilities south of Tehran, saying it would be "illogical" for the West to raise such a demand.

It's unclear, however, whether Abbasi was conveying a real negotiating position or simply testing the waters.

The proposal came from an unconventional venue, airing just before midnight on a state-run TV channel for Iranians and other Farsi-speakers abroad. Iran has used its array of government-controlled media, such as its Arabic-language Al-Alam channel, to make regional and international policy statements. Continued...