UPDATE 1-US relaxes bid to halt atom enrichment tech sales

(adds State Department official, paragraphs 7-10)

By Mark Heinrich

VIENNA, April 21 (Reuters) - The United States has given up efforts to ban uranium-enrichment technology sales to non- nuclear states, instead proposing criteria for such trade to win over critics in the Nuclear Suppliers Group, diplomats say.

But Canada and possibly some others in the 45-nation NSG may not be satisfied with parts of the new approach, the diplomats, familiar with the matter but asking for anonymity due to political sensitivities, told Reuters.

Washington's shift was the subject of a two-day consultative NSG meeting that began in Vienna on Monday. A decision on the U.S. move -- which must be made by consensus -- would be left to the group's next plenary session in Berlin on May 19-23. The NSG seeks to prevent nuclear proliferation by curbing transfers of technology of possible use in building atom bombs. But enriched uranium is also the basis of peaceful nuclear energy, for which demand in developing nations is rocketing.

Diplomats said leading world uranium producer Canada spearheaded pressure on Washington to relent on a full ban in enrichment-related sales, which has been renewed annually by G8 industrialised powers at U.S. behest since 2004 amid mushrooming concern over Iran's secretive uranium enrichment campaign.

"The United States was for years the only holdout in the NSG against sales criteria. This new language shows some U.S. flexibility on criteria," said one Western diplomat.

A U.S. State Department spokesman confirmed the change. He said the ban was only meant as a stopgap pending a deal on a system to govern such transactions that was both "reasonable" and strict enough to forestall diversions into nuclear weapons.

"Until now, proposals for amending NSG guidelines...that currently call for 'restraint'...have not been stringent enough for the U.S. to endorse," Tom Casey told Reuters in Washington.