Reuters - European parties to the Iran nuclear deal are likely to trigger a dispute resolution process in January to force Tehran to rollback violations, but would stop short of rushing to restore U.N. sanctions that would kill off the accord, diplomats said.

Iran has criticized Britain, France and Germany for failing to salvage the 2015 pact by shielding Tehran�s economy from U.S. sanctions, reimposed since last year when Washington exited the agreement between Iran and six major powers.

The deal�s objective was to extend the time Iran would need to accumulate enough fissile material for an atom bomb, if it sought one � something sometimes referred to as �breakout time� - to about a year from 2-3 months. The Europeans are alarmed Tehran�s latest moves will start eating into that time.

Washington wants to force Iran to negotiate a broader deal that includes its nuclear activities, ballistic missile program and regional influence.

In reaction to Washington�s �maximum pressure�, Iran, a longtime U.S. foe, has gradually reduced its commitments under the deal, including resuming enriching uranium at its underground Fordow plant and rapidly accelerating enrichment with advanced centrifuge machines also banned by the deal.

On Jan. 6 Iran will further distance itself from compliance with the deal, according to Iranian officials, to amplify its warnings about the dire consequences of renewing U.N. sanctions.

Six European and Western diplomats said the so-called E3 of Britain, France and Germany had agreed in principle to begin the process, although they would still wait to see how significant Iran�s latest steps were before taking a final decision.

�Launching the process aims to resolve the problematic issues and save the deal,� said a European diplomatic source. �It�s not automatic that U.N sanctions will follow. If we decided to do that (reimpose U.N. sanctions) it would mean that we have decided to put the final nail in the coffin.�

Under the terms of the 2015 deal, if any party believes another is not upholding their commitments they can refer the issue to a Joint Commission comprising Iran, Russia, China, the three European powers, and the European Union.

They then have 15 days to resolve their differences, but can choose to extend the period by consensus between all the parties.

However, if it is not extended the process escalates and can ultimately lead to the reimposition of sanctions that were in place under previous U.N. resolutions � known as a �snapback� � unless the U.N. Security Council decided otherwise.

Diplomats said that unless Iran�s upcoming violations crossed an unacceptable threshold, the Europeans would focus on extending the process rather than pushing toward sanctions. It is unclear what the breaking point for the European powers is.

U.S. SNAPBACK?

�This is not a step we want to take but Iran�s actions are leaving us little option other than to respond within the parameters of the agreement,� Britain�s envoy to the U.N. Karen Pierce said.

�Should we be forced down the path of triggering the DRM (mechanism) we would do so in order to find a diplomatic way forward with the aim of protecting the agreement.�

Three diplomats said the E3, in particular France, were lobbying Russia and China to get them on board to show unity between the five, even though Moscow and Beijing oppose launching the process for now.

A senior Iranian official involved in nuclear talks said Iran had been informed the E3 wanted to launch the mechanism.

�If they do it, Iran will act accordingly. If they want to save this deal, they have to keep their promises, otherwise Iran will take further steps,� he said, adding that the Europeans were being bullied by the United States.

The Europeans could also back down should Iran not act in January. They are hoping the first transaction as part of a humanitarian trade channel they have been working on for more than a year could be a small carrot to convince Tehran to reassess its position.

Coinciding with the European move, the U.S. State Department issued a legal reasoning seen by Reuters that concluded that the United States can trigger the �snapback� provisions of the nuclear deal despite having pulled out of the agreement, a stance that could increase pressure on the Europeans to do so.

�There isn�t a direct link between the two (the European move and the U.S. legal reasoning), but we have always made it clear we want the Europeans to return to sanctions,� a U.S. official said. �That continues to be the case.�


Additional reporting by Parisa Hafezi in Dubai, Michelle Nicols at the United Nations and Sabine Siebold in Berlin; Editing by William Maclean