By Stephanie Nebehay and Michelle Moghtader

GENEVA/DUBAI (Reuters) - Iran's talks with world powers on curbing its nuclear programme in exchange for an end to sanctions could be extended for another six months if no deal is reached by a July 20 deadline, a senior Iranian official said.

U.S. and Iranian officials held talks in Geneva on Monday to tackle ways of breaking a deadlock which has raised the likelihood that the deadline will lapse without a deal meant to head off the risk of a Middle East war over the nuclear issue.

But while the diplomacy continues doubts still remain over whether Tehran and Washington can in the end overcome their longstanding differences.

The negotiations ran into difficulty last month with each side accusing the other of making unrealistic demands, raising doubts about prospects for a breakthrough next month.

An extension should be possible, but President Barack Obama would need to secure the consent of Congress at a time of fraught relations between his administration and lawmakers.

Iran, the United States, Britain, France, Germany, Russia and China included the July 20 deadline to reach a comprehensive agreement in an interim deal they reached in Geneva on Nov. 24.

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A general view of the Bushehr nuclear power plant, some 1,200 km (746 miles) south of Tehran October …

The November agreement - under which Iran suspended some nuclear activities in exchange for limited sanctions relief - allowed for a six-month extension if more time were needed for a settlement. An extension would allow up to half a year more for limited sanctions relief and restraints on Iranian nuclear work.

Western officials say Iran wants to maintain a uranium enrichment capability far beyond what is suitable for civilian nuclear power stations. Iran says it wants to avoid reliance on foreign suppliers of fuel for planned nuclear reactors and rejects Western allegations it seeks the capability to make nuclear weapons under the guise of a peaceful energy programme.

Iranian Deputy Foreign Minister Abbas Araqchi spoke of a possible extension to the talks in remarks in Geneva to Iranian media on the sidelines of meetings with senior U.S. officials and the European Union's deputy chief negotiator.

"We hope to reach a final agreement (by July 20) but, if this doesn't happen, then we have no choice but to extend the Geneva deal for six more months while we continue negotiations," Araqchi was quoted as saying by Iran's state news agency IRNA."

"It's still too early to judge whether an extension will be needed. This hope still exists that we will be able to reach a final agreement by the end of the six months on July 20."

The No. 2 U.S. diplomat, Deputy Secretary of State Bill Burns, and Under Secretary of State Wendy Sherman, the primary U.S. negotiator with Iran, met an Iranian delegation led by Araqchi in Geneva on Thursday.

IRAN'S NUCLEAR PROGRAMPlay Video

U.S. State Department deputy spokeswoman Marie Harf said the "wide-ranging" session ran for over five hours. "They will reconvene tomorrow morning and expect to meet all day," she told reporters in Washington, as part of consultations before the next round of Vienna negotiations scheduled for June 16-20.

Araqchi, speaking later to the Iranian student news agency ISNA, described the atmosphere of Monday's talks with the Americans as "positive and constructive".

"THE PLACE WE WANT TO BE"

"We are at a critical juncture in the talks," Harf said. "We don't have very much time left. We think we've made progress during some rounds but as we said coming out of the last one we hadn't seen enough made, we hadn't seen enough realism.

"Hopefully these discussions, like the other bilateral discussions people have, can help get us to the place we want to be," Harf said.

A French diplomatic ‎source said officials from France and Iran would meet on Wednesday to discuss the Vienna negotiations. And Russian officials will have talks with the Iranians in Rome on Wednesday and Thursday, according to Iranian media.

"There are still gaps between Iran and the (six powers) in various issues and in order to bring our views closer, the other side must make tough decisions," Araqchi said.

"The goal of these negotiations was to secure the Iranian nation's rights in the nuclear issue for peaceful purposes," he was quoted as saying. "We hope that we will be able to achieve this in the remaining time under the six-month nuclear deal."

A second senior Iranian official, Takht Ravanchi, was quoted as saying that putting an end to sanctions was one of the issues discussed during the bilateral session with the Americans.

EU foreign policy chief Catherine Ashton is coordinating the six powers' talks with Tehran. Her deputy Helga Schmid is currently in Geneva for the bilateral meetings with Iran.

Separately, in a shift of tone from Prime Minister Benjamin Netanyahu's scepticism, a senior Israeli intelligence officer said on Monday that Iran was negotiating seriously on a deal to limit its contested nuclear activity.

(Reporting by Michelle Moghtader in Dubai, Dan Williams in Jerusalem, Parisa Hafezi in Ankara and John Irish in Paris; Writing by Louis Charbonneau; Editing by Mark Heinrich and Giles Elgood)

JERUSALEM (AP) — The collapse of Israeli-Palestinian peace talks has laid bare deep divisions in Prime Minister Benjamin Netanyahu's coalition that John Kerry's determined but ill-fated diplomacy had allowed to be papered over.

Key coalition allies are demanding a government initiative to extract Israel from the West Bank, while others say now is the moment for enhanced Jewish settlement and even annexation of some areas. The likely short-term outcome is a period of protracted gridlock in which hopes for peace will remain in deep freeze, and some are sensing that a government collapse and even early elections may follow suit.

"This coalition is definitely problematic," Tzipi Livni, leader of the "Movement" party and until recently Israel's chief peace negotiator, told Israel Radio on Monday.

In many ways, the coalition has been problematic since taking office in March 2013. Its members include a dovish party committed to peace with the Palestinians, a centrist party focused on domestic affairs and nationalistic elements who oppose any concessions to the Palestinians.

The resumption of peace talks last July enabled this assemblage to put its differences on hold — and forge a coalition that was convenient and, for the nine months of Kerry's labors, politically defensible. But the talks collapsed in April, as many observers had expected, and now the fissures are re-emerging with rival factions proposing wildly different ideas on how to proceed.

Last week's formation of a Palestinian unity government, backed by both President Mahmoud Abbas' Fatah and the Hamas militant group, has only added to those divisions.

Economics Minister Naftali Bennett, leader of the pro-settler "Jewish Home" party, told a prestigious security conference on Sunday that Israel should annex large parts of the West Bank, occupied territory that is almost universally seen as the heartland of a future Palestinian state. Such a move would trigger an international uproar against Israel. The 2 million-odd Palestinians in non-annexed areas would be given enhanced autonomy, he offered.

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FILE - In this Nov. 2, 2011 file photo, a worker stands by construction materials to unload at a new …

"The time has come to think differently in a creative way on how to make a better future for Israeli citizens and the Arabs of Judea and Samaria," Bennett said, using the biblical term for the West Bank.

Speaking to the same conference, Finance Minister Yair Lapid, leader of the centrist Yesh Atid (There Is a Future) party, said Israel should halt settlement construction deep inside the West Bank and in any case withdraw from areas that it does not expect to keep under a peace agreement. He said such moves would clear the way for a final agreement and negotiated borders with the Palestinians.

In his toughest comments, Lapid vowed to bring down the coalition if Israel attempts to annex "even a single settlement" unilaterally. "Yesh Atid will not only leave the government — it will also topple it," he said.

Foreign Minister Avigdor Lieberman lamented Monday that it "doesn't look good" for top officials to be sending such different messages. "We need to adopt one clear political plan that will bind all the government components," he said. "I propose that it be done as soon as possible."

Doing so won't be easy, since the disagreements cut at the very character of Israel and the essence of a longstanding internal debate.

The Palestinians claim all of the West Bank, Gaza Strip and east Jerusalem — areas captured by Israel in 1967 — for a future state. The Israelis, rather than presenting a counter-claim, are deeply torn among themselves.

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FILE - In this Monday, Sept. 7, 2009 file photo, an Israeli flag is seen in front of the West Bank J …

Netanyahu and his rightist allies suggested Monday that offering "concessions" without the promise of a return is foolish, and evidence of inexperience. But they confront a conceptual disagreement: for his coalition allies Livni and Lapid, handing over most of the Palestinian areas is not, in fact, a concession. That's because most Israeli demographers agree that without the establishment of a Palestinian state in the West Bank and Gaza, the Palestinian population, combined with Israel's own Arab minority, will soon equal and even outnumber Jews. In time partition would become impossible, undermining Israel's character as a democracy with a Jewish majority and yielding a "binational" state, they say.

"There are only two options, and nobody should mislead you about this," Livni said Sunday. "My choice, as it has always been, is a Jewish democratic state."

Hard-liners support settlements and a continued presence in the West Bank on security and religious grounds.

Throughout his current tenure as prime minister, which began in 2009 and continued with a razor-thin re-election in 2013, Netanyahu has sent mixed signals. On one hand, he has endorsed the idea of a Palestinian state, saying a binational state must be avoided. Yet he has presided over the construction of thousands of Jewish settlement homes built in areas claimed by the Palestinians, confusing even close allies about his true intentions.

Even since peace talks collapsed, Netanyahu has given no indication about where he wants to lead the country. He has dropped hints of taking some sort of unilateral action. But he has also said he would never duplicate Israel's 2005 unilateral pullout from Gaza, which cleared the way for Hamas militants to seize control of the territory and turn it into a base for rocket attacks on Israel.

Ironically, Netanyahu may have gained some time thanks to the formation of the new Palestinian government. The international community has rebuffed Netanyahu's calls to shun the new government — but he also seems to face little pressure to revive peace talks. Instead, the U.S. and European Union have decided to give the government a chance while they examine whether it remains committed to peace with Israel, as Abbas has promised.

Dov Lipman, a Yesh Atid lawmaker, said Lapid also wants to study the new Palestinian government's program and is in no rush to bring down the Israeli coalition. But he said if the situation reaches a point where the party feels peace talks can be restarted, Yesh Atid would consider pulling out.

Reuven Hazan, of the political science department at Hebrew University, said that with the Israeli parliament entering a summer recess, followed by Jewish holidays in the fall and then U.S. midterm elections, quick movement was unlikely, and might depend on the Americans.

"The decision has to be made by Obama and Kerry if they want to take their last two years and try to tackle a problem that nobody else has been able to solve in several decades," he said.

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Josef Federman is the Associated Press News Editor for Israel and the Palestinian territories. Follow him at twitter.com/joseffederman.

Dan Perry has covered the Middle East since the 1990s and currently leads AP's text coverage in the region. Follow him at twitter.com/perry_dan