* G8 statement will condemn Iranian "repression", Italy says
* Russia says election was "an exercise in democracy"
* Delegates want to leave open door to nuclear talks
TRIESTE, Italy, June 25 (Reuters) - Group of Eight powers were divided on how to respond to Iran's disputed election on Thursday, with hosts Italy pushing for a strong condemnation of violence and Russia calling the vote "an exercise in democracy".
Western nations at a meeting of G8 foreign ministers in Trieste were pushing for tough language in a final communique on Iran, where about 20 people have been killed in demonstrations following the June 12 presidential election two weeks ago.
"We are working on a document that should condemn the violence and the repression and at the same time stress that electoral procedures are an (internal) Iranian matter," said Italian Foreign Minister Franco Frattini.
But he cautioned: "We (the international community) can't recount the vote." The statement is expected on Friday. Delegates to the G8 conference, getting under way with a dinner on Thursday evening, were wrestling over the wording of the statement on Iran to take into account the sensibilities of Moscow, which has already said it considers all issues linked to the election as Iran's internal affair.
Official results handed hardline President Mahmoud Ahmadinejad a landslide victory but defeated candidate Mirhossein Mousavi has said that the vote was rigged.
Russian Foreign Minister Sergei Lavrov made clear that Russia was not prepared to sign up to a G8 statement condemning Iran's handling of the election.
"No one is willing to condemn the election process, because it's an exercise in democracy," Lavrov told reporters.
Russia is one of six powers that have been trying to solve a long-running dispute with Iran over its nuclear programme.
Iran says it wants nuclear power to generate electricity but Western powers suspect it of seeking to develop a nuclear bomb.
RUSSIA SAYS ENGAGEMENT IS KEY
"We agreed that we will develop a language which would allow us to concentrate on the main task -- to move toward resolving the issues of the Iranian nuclear programme...," Lavrov said after separate talks with Frattini.
"Isolation is the wrong approach ... Engagement is the key word," he said.
Italian Foreign Ministry spokesman Maurizio Massari said the G8 would express concern over Iran's nuclear programme but added "we want to maintain as far as possible a climate of dialogue".
Events in Iran have cast a shadow over the G8 meeting that should have focused on stabilising Afghanistan and pursuing Middle East peace.
Diplomats had seen the June 25-27 event as a rare chance for the Group of Eight nations to sit down with regional powers like Iran to discuss shared goals for Afghanistan and Pakistan. But Iran declined to answer Italy's invitation to attend.
U.S. Secretary of State Hillary Clinton is also absent after hurting her arm.
Speaking in Washington before the meeting, a senior U.S. State Department official said foreign ministers were expected to discuss the impact of the situation in Iran on efforts to engage Tehran over its nuclear programme.
European Union External Relations Commissioner Benita Ferrero-Waldner condemned excessive force by Iranian security forces against demonstrators, urged a halt to arbitrary arrests and called a crackdown on journalists unacceptable.
As delegates gathered, a small group of Iranian protesters held up signs condemning the violent crackdown in Iran.
"We want the G8 to exert pressure so Iran allows peaceful protests, free elections, democracy," said Siamak, an Iranian expatriate who fled Iran after the 1979 revolution. He declined to give his last name out of fear for his family still in Iran. (Additional reporting by Roberto Landucci and Arshad Mohammed in Washington; Writing by Adrian Croft; Editing by Peter Millership)