UPDATE 3-U.S. says can give Iran time to okay nuclear deal

* U.S. recognizes Iran has 'tough' decision to make

* Nuclear fuel deal stalled over delivery issues

* Iranians, Turks talk about third-country role in deal (Adds Clinton quotes in bold)

By Mark Heinrich

VIENNA, Nov 9 (Reuters) - The United States is willing to give Iran time to decide whether to accept a U.N.-brokered deal meant to allay suspicions it is after atomic bombs but which has drawn Iranian objections, a U.S. diplomat said Monday.

The plan for Iran to part with stocks of potential nuclear explosive material in exchange for fuel to keep a nuclear medicine facility running has stumbled on Iranian calls for amendments and more talks, which Washington has rejected.

Addressing Iran's misgivings over sending low-enriched uranium (LEU) abroad before it gets reactor fuel in return, the U.N. nuclear agency chief has suggested Iran place the LEU in a friendly third country like Turkey, pending arrival of the fuel.

Iranian and Turkish officials discussed the idea Monday on the sidelines of an Islamic states conference in Istanbul attended by Iranian President Mahmoud Ahmadinejad, Turkish officials said. They did not elaborate.

Turkey, with good ties to neighbor Iran, has said it is willing to mediate in Tehran's long standoff with Western powers over its disputed nuclear energy program.

A senior Iranian official has dismissed the idea of Iran parking its LEU in a third country.

But Tehran has yet to give a full, official reply on the proposal drafted by International Atomic Energy Agency chief Mohamed ElBaradei three weeks ago after consultations with Iran, France, Russia and the United States.

"There have been communications back and forth. We are in extra innings in these negotiations. That's sometimes the way these things go," said Glyn Davies, U.S. ambassador to the IAEA.

"We want to give some space to Iran to work through this. It's a tough issue for them, quite obviously, and we're hoping for an early, positive answer from the Iranians."

U.S. Secretary of State Hillary Clinton said initial optimism that the proposal would be accepted had been undercut by signs of discord within the Iranian leadership.

"We have seen a lot of confusion and debate within the Iranian leadership, in some measure fueled by their internal discussions arising out of the election from the opposition they faced," she told television interviewer Charlie Rose.

"We also believe a lot of it is jockeying, and some of it has got more to do with Ahmadinejad than it does with us or with this proposal," she said, adding that the international community still expected a favorable response from Tehran.

Iran next year will run out of specially fabricated fuel imported in 1993 to run a Tehran research reactor that produces radioactive isotopes for cancer treatment.

World powers saw a "win-win" deal when they thought of providing the fuel needed in return for Iran cutting its LEU stockpile below the threshold at which it could be further refined into fissile material for a nuclear warhead.

IRAN THROWS WRENCH INTO DEAL

In talks with six powers in Geneva on Oct. 1, Iran agreed in principle to send the bulk of its LEU to Russia and France for further processing and conversion into fuel plates for the Tehran reactor, Western officials said.

But they said Iran balked at fleshing out details in Vienna and seemed to retreat from the point of the Geneva deal -- to minimize the risk of Iran "weaponizing" enriched uranium arising from its record of hiding sensitive nuclear work from the IAEA.

ElBaradei's plan would have Iran send out 75 percent of its LEU stocks by the end of this year and get it back as fuel for the Tehran research reactor.

Iranian officials have variously said Tehran should give up no LEU because it is a vital strategic asset against enemies such as the United States and Israel, or it could send some out in small, staggered batches, without a deadline, but only in simultaneous exchange for reactor fuel.

They have left unclear what Iran's red line will be. But the changes mooted so far by Iran are nonstarters for the West as they would mean no reduction of its LEU reserve, now enough for use in one to two nuclear bombs if enriched to high purity.

"We believe this offer represents an important opportunity for Iran both to meet the medical and humanitarian needs that the Tehran research reactor fills and to begin to restore international confidence in their nuclear program," U.S. Secretary State Hillary Clinton told reporters in Berlin.

She spoke of "consequences" -- tougher international sanctions -- if Iran spurned the offer. German counterpart Guido Westerwelle said the six powers' patience was "not infinite."

Diplomats say Western powers will reconsider sanctions if there is no breakthrough with Iran by the end of the year.

A done deal on fuel supply would be a springboard to more ambitious talks on trade benefits and sanctions relief for Iran if it curbs the enrichment program as a whole. (Additional reporting by Ibon Villelabeitia in Istanbul and Sarah Marsh in Berlin; Editing by Louise Ireland)