Hopes that the Kremlin could broker a compromise deal on Iran’s nuclear programme faded today as Russian and Iranian negotiators ended two days of talks with few signs of progress.

Russia has been trying to persuade Iran to move all its uranium enrichment work to Russian soil to allay Western fears that Tehran is secretly developing a nuclear bomb.

Iran says it is interested in the proposal but is refusing to accept the condition that it re-instate the freeze on uranium enrichment on its own territory that it broke last month.

The two sides agreed to continue their discussions when Sergei Kiriyenko, Russia’s atomic chief, visits Iran on Thursday.

But diplomats say that leaves little time for an agreement before a meeting of the UN nuclear watchdog, the International Atomic Energy Agency, on March 6.

That meeting could start a process leading to punishment by the UN Security Council, of which Russia is one of five veto-wielding permanent members.

Ali Hosseinitash, Iran’s chief negotiator at the Moscow talks, sounded a positive note, telling state-run Iranian television that "the trend of negotiations was positive and constructive".

"There are elements in these negotiations that give us grounds for hope that we will reach an agreement," said Mr Hosseinitash, the deputy secretary of Iran’s Supreme National Security Council.

However, Russian officials sounded much less upbeat. Sergei Lavrov, Russia’s Foreign Minister, said: "I would be cautious about using the term ‘failure’ or ’setback’ as long as the negotiations have not finished."

Russia is building Iran’s first nuclear power plant and Russian nuclear and defence industries stand to lose billions of dollars of business if sanctions are imposed on Iran.

President Putin also hopes to score diplomatic points in the Middle East and the West by defusing the crisis in Russia’s first year as president of the G8 group of major industrial powers.

There is, however, a growing consensus among Russian and Western officials that Iran is stringing Moscow along to try and avoid censure by the Security Council.

Konstantin Kosachev, head of the Russian Duma’s Foreign Affairs Committee, expressed frustration at the lack of progress. "Unfortunately, Iran so far has not shown sufficient good will," he said. "In this situation, we could start moving toward the North Korean scenario, with Iran isolating itself..."

China, another permanent member of the UN Security Council, also urged Iran today to freeze uranium enrichment activities and to find a diplomatic way out of the crisis.

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