Russia Concerned about Iran Nuclear Report-diplomats

* IAEA report expected to strengthen suspicions about Iran

* Russia believed to be concerned it could hurt diplomacy

* Iran rejects Western allegations it seeks atomic bombs

By Fredrik Dahl

VIENNA, Oct 19 (Reuters) - Russia fears a U.N. report which is expected to heighten suspicions about Iran's atomic ambitions could undermine Moscow's initiative to help resolve a nuclear dispute with Tehran, diplomatic sources said on Wednesday.

Russia's concern about the timing of the U.N. report, due next month, contrasts with the hopes of Western states that the document will strengthen their case to step up pressure on the Islamic state over its nuclear programme.

Western powers fear Iran is using its nuclear programme to develop atomic weapons. Iran says it needs to refine uranium for a planned network of nuclear power plants.

Russia's concerns may be a sign of differences among the six major powers involved in the search for a diplomatic solution to the nuclear row -- the United States, Russia, China, Britain, France and Germany -- on how to best approach the Iran issue.

Russia, which has commercial and other links with Iran, has proposed a step-by-step diplomatic effort to defuse the nuclear standoff but Western diplomats have given the plan a cool response.

Moscow and Beijing have backed four rounds of U.N. sanctions on Iran since 2006 over its refusal to halt sensitive nuclear work that could have both civilian and military uses.

But they criticised the United States and the European Union last year for taking additional unilateral steps against the major oil producer and it is uncertain whether they would back any new Western sanctions push at the United Nations.

"I think it is unlikely that Russia and China will consent to a new round of crippling sanctions before negotiations are given another chance," said Ali Vaez of the Federation of American Scientists, a Washington-based think tank.

The International Atomic Energy Agency, the U.N. nuclear watchdog, is expected in its report to spell out in detail why it said last month that it is "increasingly concerned" that Iran may be seeking to develop nuclear missiles.

RUSSIAN PLAN

Diplomats say IAEA Director General Yukiya Amano may stop short of explicitly declaring whether he believes Iran has been working on a nuclear weapons programme, as Tehran's Western adversaries would want him to.

"We think the IAEA has a lot of information that would allow the agency to come to clear findings on the issue of possible military dimensions," one Western official said.

Vienna-based diplomats stressed that the report was still being drafted by IAEA experts and the wording could change.

Two diplomats said they believed Russia was concerned that a strongly worded document would further sour the atmosphere with Iran and therefore damage the chances of Moscow's diplomatic plan to succeed.

They suggested Russia was mainly worried about the timing of the report's publication, rather than about its content.

Russia's mission in Vienna was not immediately available for comment.

Since negotiations between the powers and Iran foundered in January, Russia has advocated a phased plan in which Tehran would address concerns that it may be seeking nuclear weapons, and be rewarded with an easing of sanctions.

The proposal, described by Russian Foreign Minister Sergei Lavrov in July in Washington, seeks to revive negotiations to put to rest suspicions that Iran may be seeking nuclear arms.

Talks between Iran and the six powers in Geneva in December and in Istanbul in January failed to make headway on reining in Iran's nuclear programme.

Iran has said it is willing to resume discussions, but its insistence that other countries recognize its right to enrich uranium is a major stumbling block, particularly for Western diplomats who see it as an unacceptable precondition.

Western diplomats have raised doubts about the Russian plan's ability to defuse the long-running row and also noted that Tehran has yet to give a clear answer to Moscow.

"The Russian proposal does not appear to fly. I can't see any movement on the nuclear issue," said a senior diplomat based in Tehran. (Editing by Andrew Heavens)