* Six powers demand concession from Iran over nuclear work

* No breakthrough seen in Moscow, talks likely to continue

* Israel threatens air strikes, West tightens sanctions

MOSCOW, June 18 (Reuters) - World powers will seek to avert a collapse of diplomacy over Iran´s nuclear programme at talks starting in Moscow on Monday, hoping to win concessions from Tehran and forestall a potential new war in the Middle East.

Consequences of failure could be devastating. Israel has threatened to bomb Iran if no solution to the dispute is found , oil markets are nervous over the prospect of intensifying regional tensions and the frail world economy can ill afford further spikes in the price of crude.

But after two rounds of negotiations in as many months, the sides are hardly any closer to reaching an agreement than before diplomacy resumed in April following a 15-month hiatus.

In Moscow, the six powers - the nuclear armed United States, Russia, China, France, and Britain, plus Germany - will again push Tehran to address their most pressing concern, its enrichment of uranium to 20 percent fissile purity. Such production represents a major technological advance towards making weapons-grade material.

But they are wary of letting diplomacy drag on without clear progress, potentially buying Iran time to build up a programme they fear is aimed to develop weapons, something Tehran denies.

"We are very much determined to pursue this process as long there is momentum to pursue, and as long as there is commitment (from Iran) to pursue the nuclear issue in substance," a senior European Union diplomat said.

Experts and diplomats say chances of a breakthrough in Moscow that could end the decade-long standoff are slim.

The six powers - led by EU foreign policy chief Catherine Ashton - hope at least to win assurances that Tehran is willing to discuss concrete solutions, opening the way to further meetings.

"Ashton is willing to stay in Moscow as long as it takes," the diplomat said. "But there is a time limit also ... We will have to say ´no´ to talks for talks´ sake."

"DIAMONDS FOR PEANUTS"

Ahead of the Moscow talks, scheduled to start around 11 a.m. (0700 GMT) and last two days, each side has accused the other of obstructing diplomacy.

Iran has insisted progress will be only made if the six powers issue a public acknowledgement of its right to enrich uranium, something they have refused to do until Tehran agrees to in-depth U.N. inspections of its nuclear sites.

The Islamic Republic´s chief negotiator, Saeed Jalili, told a Russian television station Iran´s right to enrich uranium ought to be "recognised and respected".

Iran is also seeking an end to increasingly tough economic sanctions which have in recent months directly targeted its ability to export oil.

Jalili has indicated the powers´ offer of nuclear fuel supplies for a research reactor and relief in sanctions on the sale of commercial aircraft parts to Iran was not enough.

At the last talks, in Baghdad last month, the six nations asked Tehran in return to stop producing higher-grade uranium, ship any stockpile out of the country and close down the underground Fordow facility where such work is done.

A former Iranian negotiator, Hossein Mousavian, called that offer "diamonds for peanuts", telling Reuters that the Moscow talks would likely fail without substantial concessions by the six powers.

For their part, Western diplomats have said their concerns about the nature of Iran´s nuclear work have intensified.

The International Atomic Energy Agency (IAEA) failed to persuade Iran, in talks this month, to let it inspect a military site, Parchin, where it suspects atom bomb-related research took place.

"What is worrying is that the IAEA track has stalled. It seems to be a mirror image of what is happening in our negotiations," said the senior European diplomat involved in the talks, speaking on condition of anonymity.

SHOW TIME

Last week, after acrimonious letters and phone calls between EU and Iranian diplomats, EU officials said Jalili had agreed to give serious consideration to the six powers´ proposal. But some experts say the apparent progress may be illusory.

"The Iranians bob and weave like a boxer before any major negotiation. They threaten, they are conciliatory," said Cliff Kupchan, a Middle East analyst at consultancy Eurasia Group.

"All that matters is what they say when it´s show time."

Failure to at least agree further talks would be a diplomatic disaster for Russia, which opposes sanctions and military intervention in both Iran and its ally Syria and casts itself as a key player in the search for peaceful solutions.

"It´s a matter of prestige for the Russians," said Emanuele Ottolenghi of the Washington think-tank Foundation for the Defense of Democracies.

But U.S. and European diplomats have given no public indication of any willingness to scale back economic sanctions for now. An EU embargo on Iranian oil takes full effect on July 1 and new U.S. financial sanctions some days before that.

"Sanctions will enter into force in July unless something very dramatic happens," said a Western diplomat.

Measures including the EU ban on Iranian crude, are already taking a toll. Iran´s exports have fallen by some 40 percent since this year, according to the International Energy Agency . Iran says it has no problem replacing customers that choose to boycott its crude.

Academics say one way Western countries could keep diplomacy on track would be to pledge not to introduce any further measures while substantive talks continue.

"The Iranians can say: ´If you commit to not introducing any new sanctions as long we are negotiating, we can engage in this proposal´. Then they argue about the details," said Ottolenghi. (Additional reporting by Yeganeh Torbati in Moscow, Mohammed Abbas in London, Fredrik Dahl in Vienna and Marcus George in Dubai; Editing by Robin Pomeroy) (© Thomson Reuters 2012. 06/17/12)