By Parisa Hafezi, Phil Stewart and Steve Holland
DUBAI/WASHINGTON, June 12 (Reuters) - The United States and Iran signaled on Friday that an agreement to end their war was close, with a senior U.S. administration official saying both sides had agreed on a text and that Washington expects to sign an initial deal in the coming days.
Iranian Foreign Minister Abbas Araqchi said that while changes in the deal were still possible, the tentative agreement showed his country had emerged stronger from the conflict.
"Iran is the winner of the war with the U.S.," he said on state television.
Hours after those remarks, U.S. forces shot down multiple Iranian one-way attack drones heading toward the Strait of Hormuz, a source familiar with the matter told Reuters. The source, who spoke on condition of anonymity, said the drones had posed a threat to commercial traffic.
Iranian news agencies had reported that explosions were heard along the strait in Iran's Sirik port and Qeshm island, which residents and local officials attributed to shots fired by Iranian forces to warn vessels attempting to cross the waterway without permission from the Revolutionary Guards' navy.
The proposed memorandum of understanding calls for reopening the strait and lifting the U.S. naval blockade on Iranian ports, sources on all sides of the talks said. Negotiations over Iran's nuclear program -- U.S. President Donald Trump's stated rationale for starting the war -- would take place afterward.
The U.S. official, speaking on condition of anonymity, told reporters that the deal met Trump's core objectives and put negotiations "in a very, very good place."
Accounts of the draft proposal from Western, Pakistani and Iranian sources pointed to terms that could favor Iran, drawing criticism from Trump, who dismissed the reports as inaccurate.
While there were minor differences in the details, the proposals broadly offered Tehran much of what it has sought, with Trump appearing to secure little beyond the reopening of the strait, which Iran closed after the U.S. and Israel strikes in February.
Araqchi said Iran would, along with Oman, retain control of traffic through the strait, which before the war handled one-fifth of the world's oil and gas supply.
"Our sword will always hang over the Strait of Hormuz," he said.
A Western source said the deal could be signed as soon as Sunday by U.S. Vice President JD Vance and Iran's parliament speaker, Mohammad Baqer Qalibaf, with Geneva seen as the likeliest venue.
Araqchi said the deal would be signed remotely before it is announced.
The U.S. administration official said Europe had been discussed as a venue for signing but no decision had been made.
WHAT'S IN THE DEAL?
Draft terms of the deal described to Reuters by multiple sources indicate the U.S. would begin releasing billions of dollars in frozen Iranian assets and waive sanctions on its oil exports, in return for Iran opening the strait.
Iran's nuclear program would be addressed during a 60-day period of talks. The U.S. official said the agreement would ultimately lead to the dismantling of Iran’s nuclear program, with its stockpile of highly enriched uranium to be destroyed and removed. The terms also include an inspection regime to ensure compliance over the long term.
But Araqchi told state television that Iran, which sources said has not accepted the dismantling of its nuclear program, wanted to retain the uranium in diluted form. “For Tehran, the only preferred solution for its highly enriched uranium stockpile is down-blending the material,” he said.
The proposals include discussion of possible war reparations for Tehran and dropping longstanding U.S. demands for limits on Iran's missile program, the sources said. The U.S. official disputed that account.
"None of their money released until they perform. Strait of Hormuz will be open. No Iran funding of terrorist groups," said the official, who spoke on condition of anonymity. "This is what they have agreed to. This is a performance-based deal."
ISRAEL NOT PARTY TO MEMORANDUM
Israel, which launched the war alongside the United States, has not been part of the negotiations. Prime Minister Benjamin Netanyahu said his country would not be party to the agreement.
Netanyahu has clashed with Trump in recent weeks over U.S. demands that Israel curb military action in Lebanon to allow Washington to reach a deal with Tehran.
Araqchi said the agreement would end the war in Lebanon, implying an Israeli withdrawal from occupied areas.
Israel's defense minister said it would not withdraw. A senior Israeli official said Israel expects to retain its freedom to act against threats in areas under its control.
OIL PRICE FALLS
Progress towards an agreement has emerged at the end of a week that brought a sharp escalation in hostilities in the Gulf, including Israeli-Iranian exchanges of fire and U.S. strikes on Iranian targets, followed by retaliation against U.S. bases.
Global stock markets rose and oil prices fell on the news. Brent crude prices were down more than 3% at their lowest in nearly two months.
The conflict has become a political headache for the White House, amid rising fuel prices and slipping approval ratings for Trump.
Some Republicans worry that the war's unpopularity could cost them control of Congress in November's midterm elections. But many of Trump's fellow Republicans may have difficulty endorsing an agreement viewed as too favorable to Iran.
(Reporting by Reuters bureaus; Writing by David Morgan, Andy Sullivan, Peter Graff and Ros Russell; Editing by Gareth Jones, Sanjeev Miglani, Edmund Klamann, Sergio Non and Kim Coghill)
