World powers on Monday sought to wring concessions out of Iran to defuse the decade-long crisis over its nuclear drive at talks in Moscow billed as a last chance to find a diplomatic solution.

Western diplomats were looking for signs that Iran could show willingness to scale down the intensity of its sensitive uranium enrichment activities as the Islamic Republic made a customary show of public defiance.

Chief Iranian nuclear negotiator Saeed Jalili sat down with representatives from six world powers including Tehran's arch foe the United States as well as EU foreign policy chief Catherine Ashton for two days of talks which will show if there is any hope of progress.

"These negotiations are a big test to see if the West is in favour of Iran's progress or against," Jalili, apparently in uncompromising mood, told Iranian state television as he went into the talks.

But the spokesman of the EU delegation told reporters that world powers were sticking by a previous demand for Iran to halt enriching uranium to 20 percent -- a level approaching that needed to make an atomic bomb.

"Our priority is for the Iranians to address the 20 percent," said the spokesman, adding that Iran should also shut down its Fordo enrichment plant outside the holy city of Qom.

Failure in the talks could have a heavy toll with the United States and its ally Israel refusing to rule out the option of airstrikes against the Iranian nuclear programme and Tehran facing sanctions that could cripple the economy.

But Iran made clear ahead of the negotiations it has no intention of abandoning its right to enrich uranium, a process which can be used to make nuclear fuel but also the explosive core of an atomic bomb.

"If this demand isn't recognised, the negotiations are certainly headed for failure," an unidentified Iranian official at the talks said, according to state news agency IRNA.

Russia's Kommersant daily said Iran would be offered a compromise plan under which it would scale down the degree to which uranium is enriched at its main enrichment facility in Natanz from 20 percent to 3.5 or 5 percent.

The West accuses Iran of seeking an atomic bomb under the guise of a civilian nuclear energy programme, a charge vehemently denied by Tehran. Host Russia has long taken a more cautious line, saying Iran must restore confidence but not explicitly accusing it of military intentions.

The urgency for Iran is compounded by the July 1 deadline the European Union has slapped on a full oil embargo against Tehran and the June 28 rollout of tough US sanctions against a host of countries that buy Iranian oil.

"This meeting is going to be decisive. (If the talks fail) a toughening of sanctions against Tehran will be unavoidable and the use of military force very real," said Kommersant.

In a hint of compromise, President Mahmoud Ahmadinejad said Iran is ready to suspend its controversial enrichment of uranium to 20 percent if Europe guarantees delivery of nuclear fuel for its reactors, according to his website.

An Iranian diplomat at the talks promised that Iran "will discuss seriously the topics raised" by the P5+1 world powers -- Britain, China, France, Russia and the United States, plus Germany -- in Moscow.

The talks follow a bruising session in Baghdad in May that failed to make any noticeable progress beyond agreeing a date for more talks, an outcome that may not be acceptable again for the West.

A Western diplomatic source, who asked not to be named, warned that "Iran should come prepared to negotiate seriously" at the talks and consider the proposals put forward by world powers.

"If Iran remains unwilling to take the opportunities these talks present, it will face continuing and intensified pressure and isolation," added the source.