By Louis Charbonneau, John Irish and Parisa Hafezi
LAUSANNE, Switzerland, April 1 (Reuters) - Major powers and Iran stretched marathon talks on Tehran's nuclear program into a second day past their deadline, with diplomats saying prospects for a preliminary agreement were finely balanced between success and collapse in the coming hours.
The negotiations, aimed at blocking Iran's capacity to build a nuclear bomb in exchange for lifting sanctions, have become bogged down over crucial details of the accord, even as the broad outlines of an agreement have been reached.
After negotiators blew past the original self-imposed deadline of midnight on Tuesday, they remained locked in talks through to the early hours of Thursday in the Swiss city of Lausanne.
U.S. Secretary of State John Kerry and German Foreign Minister Frank-Walter Steinmeier said they would stay at least until Thursday in an effort to seal the "political" agreement, a milestone towards a final pact due by the end of June.
In a potentially hopeful sign, French Foreign Secretary Laurent Fabius returned for more talks after flying back to Paris the previous day because progress had been too slow.
"We are a few meters from the finishing line, but it's always the last meters that are the most difficult. We will try and cross them," Fabius said upon his return.
"It's not done yet. We want a robust and verifiable agreement and there are still points where there needs to be progress especially on the Iranian side," he said.
One diplomat close to the talks said late on Wednesday that a deal could be announced within hours but had not yet been reached, and the talks could still fall apart.
Six world powers - the United States, Britain, France, Germany, Russia and China - aim to stop Iran from gaining the capacity to develop a nuclear bomb. Tehran wants to lift international sanctions that have crippled its economy, while preserving what it views as its right to nuclear technology for peaceful purposes.
The powers and Iran said they had moved closer, but both sides accused the other of refusing to offer proposals that would break the deadlock.
The talks - the culmination of a 12-year process - have become hung up on the issues of Iran's nuclear centrifuge research, details on the lifting of U.N. sanctions and how they would be re-imposed if Iran breached the agreement.
All sides are under pressure not to go home empty handed, but Washington reiterated on Wednesday it was willing to walk away if the sides couldn't agree on a preliminary framework.
White House spokesman Josh Earnest told reporters in Washington: "the time has come for Iran to make some decisions."
The talks represent the biggest chance of rapprochement between enemies Iran and the United States since the Iranian revolution in 1979, but face skepticism from conservatives in both Washington and Tehran.
Washington's allies in the region, especially Israel and Saudi Arabia, are also deeply wary of any deal.
Even if there is a preliminary deal, it will be fragile and incomplete and there is no guarantee of a final deal in the coming months.
CHAOS, DISUNITY
After missing the March 31 deadline, the negotiators broke for a few hours rest in the early morning hours of Wednesday, with an air of disunity as delegations scrambled to get contradictory viewpoints across.
All sides have described the talks as fragile. Asked by a reporter later on Wednesday if collapse of the negotiations was a possibility, Germany's Steinmeier replied: "Naturally."
"Whoever negotiates has to accept the risk of collapse," he added. "But I say that in light of the convergence (of views) that we have achieved here in Switzerland, in Lausanne, it would be irresponsible to ignore possibility of reaching an agreement."
He said he would consider further travel plans on Thursday morning depending on how the talks develop. New proposals and recommendations were expected later on Wednesday, he said, but the onus was on Tehran to make them.
Kerry's spokeswoman Marie Harf said progress had been made but the sides had not reached a "political understanding."
Iran's Foreign Minister Mohammad Javad Zarif told reporters it was the major powers who must budge, not Tehran.
"Progress and success of the talks depends on the political will of the other party ... and this is an issue they have always had a problem with," he told reporters.
But Iran expressed optimism that an initial agreement was within reach. So did Russia, which is closest to Iran among the powers.
Senior Iranian negotiator Abbas Araqchi told state television Tehran hoped to wrap up the talks on Wednesday evening. He added that he expected the parties to issue a joint statement declaring that "progress has been made in the talks and that we have come to a solution on key issues. We will have the solutions in written form."
Western officials questioned Araqchi's optimism.
"I think we have a broad framework of understanding, but there are still some key issues that have to be worked through," British Foreign Secretary Philip Hammond told the BBC.
A key goal of the talks for Washington is to impose conditions on Iran that would increase the "breakout time" Tehran would need to develop a nuclear weapon if it should decide to pursue one. (Additional reporting by Stephanie Nebehay in Lausanne, Gabriela Baczynska in Moscow and Elizabeth Pineau in Paris; Writing by Stuart Grudgings; Editing by Frances Kerry.)
The talks -- the latest in more than a decade of diplomatic efforts to curb Iran's nuclear prowess -- will hit the weeklong mark on Thursday, with diplomats from the five permanent members of the U.N. Security Council and Germany scrambling to reach a framework accord with Iran.
"We continue to make progress but have not reached a political understanding," spokeswoman Marie Harf said in announcing Kerry's decision.
German Foreign Minister Frank-Walter Steinmeier said negotiators were still facing a "tough struggle."
A French diplomat said French Foreign Minister Laurent Fabius was heading for Lausanne less than a day after he departed. Asked why, the diplomat referred a reporter to the minister's comments earlier in the day when he said he would come back if there were chances for a deal.
At the same time, Iranian Foreign Minister Mohammed Javad Zarif accused his country's negotiating partners, particularly the U.S., of having "defective" political will in the talks.
"I've always said that an agreement and pressure do not go together, they are mutually exclusive," he told reporters. "So our friends need to decide whether they want to be with Iran based on respect or whether they want to continue based on pressure."
The negotiators' intention is to produce a joint statement outlining general political commitments to resolve concerns about the Iranians' nuclear program in exchange for relief of economic sanctions against Iran. In addition, they are trying to fashion other documents that would lay out in more detail the steps they must take by June 30 to meet those goals.
But Iran has pushed back, demanding a general statement with few specifics. That is politically unpalatable for the Obama administration, which must convince a hostile Congress that it has made progress in the talks so lawmakers do not enact new sanctions that could destroy the negotiations.
By blowing through self-imposed deadlines, Obama risks further antagonizing lawmakers in both parties who are poised to take their own action to upend a deal if they determine the president has been too conciliatory.
The initial response to the extensions from Republicans suggested they had already come to that conclusion.
"It is clear, the negotiations are not going well," said Sens. John McCain and Lindsey Graham in a statement. "At every step, the Iranians appear intent on retaining the capacity to achieve a nuclear weapon.
Iran's Zarif insisted the result of this round of talks "will not be more than a statement." But a senior Western official said Iran's negotiating partners would not accept a document that contained no details. The official was not authorized to speak to the negotiations by name and spoke on condition of anonymity.
Deputy Iranian Foreign Minister Abbas Araghchi named differences on sanctions relief as one dispute -- but also suggested some softening of Tehran's long-term insistence that all sanctions be lifted immediately once a final deal takes effect.
He told Iranian TV that economic, financial, oil and bank sanctions imposed by the U.S., the European Union and others should be done away with as "the first step of the deal." Alluding to separate U.N. sanctions, he said a separate "framework" was needed for them.
Araghchi has spoken of such an arrangement before. But both Supreme Leader Ayatollah Ali Khamenei and Iranian President Hassan Rouhani have since demanded full and total sanctions lifting, and the floating of the approach now suggested an Iranian shift.
Araghchi also rejected U.S. demands of strict controls on Iran's uranium enrichment-related research and development, saying such activities "should continue."
The U.S. and its negotiating partners want to crimp Iranian efforts to improve the performance of centrifuges that enrich uranium because advancing the technology could let Iran produce material that could be used to arm a nuclear weapon much more quickly than at present.
The additional documents the U.S. wants would allow the sides to make the case that the next round of talks will not simply be a continuation of negotiations that have already been twice extended since an interim agreement between Iran, the United States, Russia, China, Britain, France and Germany was concluded in 2013. President Barack Obama and other leaders, including Iran's, have said they are not interested in a third extension.
Meanwhile, the White House says new sanctions could not only scuttle further diplomatic efforts to contain Iran's nuclear work but possibly lead Israel to act on threats to use military force to accomplish that goal.
Israeli Prime Minister Benjamin Netanyahu, who has campaigned tirelessly for months against the emerging agreement, said it would "ensure a bad deal that would endanger Israel, the Middle East and the peace of the world."