Iran's foreign minister walked out of a dinner of diplomats where he was seated directly across from Secretary of State Condoleezza Rice, on the pretext that the female violinist entertaining the gathering was dressed too revealingly.

"I don't know which woman he was afraid of, the woman in the red dress or the secretary of state," State Department spokesman Sean McCormack said Friday, regarding the actions of Iran's Manouchehr Mottaki.

The dinner episode Thursday night amid a major regional conference on Iraq perfectly revealed how hard it was to bring together the top diplomats of the two rival nations.

Meanwhile, Iraq's neighbors on Friday negotiated a declaration that would pledge support for Iraq's embattled Shiite-led government in return for more inclusion of Sunni Arabs in the political process.

A draft copy of the six-page declaration said the summit participants would agree to support Iraq's government as long as it ensured the "basic right of all Iraqi citizens to participate peacefully in the political process through the country's political system."

Going into the summit, the Iraqi government had hoped for a breakthrough meeting between Rice and Mottaki. Instead, their only direct contact was a wary exchange of pleasantries over lunch Thursday, punctuated by a wry, somewhat mysterious comment by Mottaki.

Mottaki walked out of the diplomats' dinner on the pretext that the female violinist entertaining the gathering was dressed too revealingly.

The Iranian entered the lunch, greeting the gathered diplomats with the Arabic phrase, "As-salama aleikum," or "Peace be upon you," according to an Iraqi official who was present.

Rice replied to him in English, "Hello," then added: "Your English is better than my Arabic," according to the Iraqi official, who spoke on condition of anonymity because the lunch was private.

Egyptian Foreign Minister Ahmed Aboul Gheit then piped in, telling Mottaki, "We want to warm the atmosphere some."

Mottaki smiled and replied in English with a saying: "In Russia, they eat ice cream in winter because it's warmer than the weather" — more or less meaning, "You take whatever atmosphere-warming you can get."

"That's true," Rice replied, according to the Iraqi official.

After lunch, Egypt's Aboul Gheit told the Associated Press he would try to arrange a further informal meeting between Rice and Mottaki at a gala dinner being thrown by the Egyptians Thursday night on the beach of a nearby resort hotel.

"Why not?" Aboul Gheit said. "It is only one table." But asked if he would seat Rice and Mottaki next to each other, he said, "No, no."

As it turned out, Mottaki's place was set directly across the table from Rice. When Mottaki entered the dinner and saw the arrangement, he immediately told his hosts that he had to excuse himself and leave, said a U.S. official who accompanied Rice.

Mottaki complained that the Egyptian female violinist playing nearby was too revealingly dressed, the official said, speaking on condition of anonymity, also because the dinner was a closed affair.

The Iraqi government and some Arab countries had hoped for a real one-on-one meeting between Rice and Mottaki, saying that the two countries' conflict is only fueling Iraq's chaos. Ahead of the two day conference in the Egyptian resort of Sharm el-Sheik, Rice had expressed a willingness to meet, and Iranian President Mahmoud Ahmedinejad said he would welcome talks.

But on Thursday, Rice said the American side was not asking for a meeting, and the Iranians appeared reluctant to be the ones to make the first move.

The U.S. accuses Iran of increasing Iraq's violence by backing militants there, as well as accusing Tehran of aiming to build a nuclear weapons program. The Bush administration has rejected direct talks with Iran despite growing calls for contacts.

Iran denies the U.S. accusations and is calling for U.S. troops to leave neighboring Iraq, blaming Washington's policies for the country's bloodshed.

Separately Thursday, summit participants agreed on the International Compact with Iraq — an ambitious blueprint to stabilize the nation.

The plan sets benchmarks to achieve a stable, united, democratic Iraq within five years. It defines international help for Iraq — including debt relief — but also sets tough commitments on the Baghdad government, particularly carrying out reforms aimed at giving Iraq's Sunni Arabs a greater role in the political process.

The Iraqi government, the United Nations and many of the more than 60 countries and international organizations gathered here hailed the launch of the blueprint as a milestone.

___

Associated Press correspondent Edith M. Lederer contributed to this story.

Iran and the United States met at expert level on the sidelines of an international conference in Egypt on Friday, Iraqi Foreign Minister Hoshiyar Zebari said.

"A meeting took place on the sidelines of the meeting, not at foreign minister level but at expert level, between the American side and the Iranian side," he told a news conference.

Diplomats said U.S. Secretary of State Condoleezza Rice had been open to a meeting with Iranian Foreign Minister Manouchehr Mottaki -- which would be the highest level contact since Iran's 1979 revolution -- but the Iranians were cool to the idea.

On Thursday Rice did meet Syrian Foreign Minister Walid al-Moualem, marking a shift in U.S. President George W. Bush's once resolute opposition to high-level contacts with Iran and Syria as he seeks ways to end the Iraq conflict.

Rice and Mottaki have been together in the Egyptian Red Sea resort of Sharm el-Sheikh for two days for the conference on financial support for Iraq and on relations with its neighbors.

Zebari added: "I don't know what went on in that meeting (of experts) but I think it was a positive sign that at least such a thing did take place while we are here.

"This is a process I think. It needs more work. There is a lot of suspicion. There is a lot of mistrust. But it is in my country's interest really to see a reduction of this tension."

Egyptian Foreign Minister Ahmed Aboul Gheit said the meeting was "the beginning hopefully of a process," adding that the officials who met were ambassadors. He did not identify them.

He was speaking after Prime Minister Nuri al-Maliki urged Iraq's neighbours to stop militants sneaking into Iraq, saying his country would "not allow terrorist organizations to use Iraqi territory as a safe haven."

Iraq's six neighbours are attending the Sharm el-Sheikh meeting, which welcomed Arab League attempts to hold a conference on national reconciliation.

The five permanent members of the U.N. Security Council, the European Union and the Group of Eight leading industrialized countries also took part in the meeting.

BORDER SECURITY

The talks focused on border security, Iraqi refugees and political reconciliation between Iraqi factions and ethnic and religious communities.

The final communique from the conference called on the Arab League to resume preparations for the reconciliation conference for Iraq, a project which has languished for over a year.

"We are ready for this. We are ready to host Iraqi national reconciliation," Mouusa said. "Now is not the time to exchange accusations but is the time to work together."

The communique gave no time frame for such a meeting, nor say where it would be held.

The 22-member Arab League is based in Cairo but Iraqi government spokesman Ali al-Dabbagh said the best place for the conference would be inside Iraq.

Iran had been cool about a meeting with Rice and an Iranian spokesman said on Tuesday that it would not negotiate with Washington until it stops its "evil approach."

In his speech to a closed session, Mottaki blamed Iraq's troubles on the U.S. invasion of 2003 and called for the release of five Iranian civil servants held by the Americans in Iraq.

He called for U.S. and other foreign troops to leave Iraq, coupled with stronger support for the Shi'ite-led Baghdad government, but did not say when this should happen.

From an aircraft carrier in the Persian Gulf, Vice President Dick Cheney warned Iran on Friday the U.S. and its allies will keep it from restricting sea traffic as well as from developing nuclear weapons.

"We'll keep the sea lanes open," Cheney said from the hangar deck of the USS John C. Stennis as it steamed about 150 miles from the Iranian coast.

Cheney is touring the Middle East asking Arab allies to do more to help Iraq and to curb Iran's growing power in the region. With Iraq in turmoil, both Iran and Saudi Arabia are maneuvering to see who can help fill the leadership vacuum.

The vice president made clear the United States' intentions on the rivalry. "We'll stand with others to prevent Iran from gaining nuclear weapons and dominating this region," he said.

On Saturday, Cheney will make a fence-mending visit to Saudi Arabia.

The oil-rich kingdom, long a key American ally in the Middle East, recently has been shunning the U.S.-supported government of Iraqi Prime Minister Nouri al-Maliki, suggesting he is too close to Iran.

Roughly a quarter of the world's oil supplies pass through the narrow Straits of Hormuz connecting the Persian Gulf with the open waters of the Arabian Sea. Iran controls the eastern side of the straits.

With two U.S. carrier groups now in the region, the vice president declared, "We're sending clear messages to friends and adversaries alike. We'll keep the sea lanes open."

The carrier was in the Gulf about 20 miles off Abu Dhabi in the United Arab Emirates. Cheney is spending time there after a two-day tour of Iraq.

Standing in front of five F18 Super Hornet fighters and a huge American flag in the cavernous hangar deck — one flight below the carrier's flight deck — Cheney sounded a hard line both on holding firm in Iraq and confronting Iran if necessary.

Just over four years after President Bush stood on another aircraft carrier beneath a "Mission Accomplished" banner and declared an end to major combat, Cheney had a far more subdued message.

"We want to complete the mission, get it done right, and return with honor," he told Stennis crew members.

Officials said that between 3,500 and 4,000 of the carrier's 5,000 sailors and Marines stood in sweltering heat — hovering over 100 degrees — to hear Cheney speak.

"It's not easy to serve in this part of the world. It's a place of tension and many conflicts," said Cheney.

"We'll stand with our friends in opposing extremism and strategic threats. We'll disrupt attacks on our own forces," he added. U.S. officials have said that some of the sophisticated roadside bombs used against U.S. troops in Iraq have come from Iran.

After returning from the carrier, Cheney had dinner with Emirates Crown Prince Sheik Mohammed bin Zayed Al Nahyan.

On Saturday, before leaving for Saudi Arabia, Cheney is expected to press Emirates President Sheik Khalifa bin Zayed Al Nahyan to support U.S. efforts in Iraq and to shut down Iranian companies in his country that U.S. officials believe are backing Iran's nuclear development.

Some 500,000 Iranians live in the Emirates.

Cheney's visit comes just two days before Iranian President Mahmoud Ahmadinejad is to visit Abu Dhabi.

Ahmadinejad wants the Emirates and other Gulf Arab countries to drop their military alliances with Washington and join Iran in regional efforts. The United States has about 40,000 troops on land bases in Gulf countries outside Iraq and about 20,000 sailors and Marines in the region.

No Gulf state has yet backed Iran's offer of an alliance.

Iran's top nuclear negotiator said Friday that a compromise over its nuclear program was impossible if the West continued to demand Tehran suspend uranium enrichment, Iran's state broadcasting company reported on its Web site.

Ali Larijani's comments came a day after the U.S. and France took Iran to task during a conference on nuclear proliferation for defying a U.N. Security Council demand that it freeze enrichment.

"If the West again applies the past wordings about Iran's nuclear case, this issue will not conclude," the Web site quoted Larijani as saying. "They should abandon this idea that they can change conditions of Iran's nuclear case by applying harsh word policy."

When he goes to Saudi Arabia on Saturday, Cheney faces a difficult diplomatic mission — trying to ease concerns of King Abdullah about the direction of al-Maliki's Shiite-dominated government in Iraq.

Abdullah has increasingly sent signals that he doubts the U.S. troop buildup to help secure Baghdad will work.

The king refused to see al-Maliki as the Iraqi prime minister was making a tour of Arab countries late last month. And during a regional conference in the Egyptian resort of Sharm el-Sheik in early May, Saudi Arabia's foreign minister was one of the few Arab diplomats al-Maliki did not meet in face-to-face talks.

Abdullah's snub to al-Maliki appeared aimed at showing Saudi Arabia's concern that the Iraqi government is too close to Iran and is not doing enough to reconcile with Iraq's Sunni Arab minority, a Saudi official said at the time.

Iran, like Iraq, is heavily Shiite. Saudi Arabia has a predominantly Sunni Muslim population.

The visit to the Stennis was a return trip for Cheney, who came to the carrier — then in the Arabian Sea — in March 2002 as he was trying to build support in the area for invading Iraq.

Cheney flew to and from the carrier Friday by helicopter.

The U.S. and Iran said Sunday they will hold upcoming talks in Baghdad about improving Iraq's security — a historic political turnabout for the two countries with the most influence over Iraq's future.

Expectations of progress remain low, however, with tough issues at stake and mutual suspicions running high. Even as it announced the talks, Iran lashed out at Vice President Dick Cheney's weekend warnings about its nuclear program, saying it would retaliate if the U.S. attacked it.

Yet the two sides said they were setting aside such differences to focus on a narrow issue — Iraq's continued violence and sharp political deterioration.

"The purpose is to try to make sure that the Iranians play a productive role in Iraq," said Gordon Johndroe, the White House's National Security Council spokesman.

Cheney's spokeswoman, Lea Anne McBride, also confirmed the upcoming talks, saying the vice president supports the move as long as they focus solely on Iraq.

Iran agreed to the talks "after consultation with Iraqi officials, in order to lessen the pain of the Iraqi people, support the Iraqi government and establish security and peace in Iraq," the state-run news agency, IRNA, quoted Foreign Ministry spokesman Mohammad Ali Hosseini as saying.

Iraqi leaders have leaned on the Bush administration to try to cooperate with Iran in the interest of stabilizing their country. Likewise, some Mideast Arab allies of the U.S. — increasingly distrustful of Iraq's Shiite-led government — have pushed for talks with Iran as a way to reduce sectarian tensions in the country and stop attacks against Sunnis.

The decision to talk comes at a critical time of plunging U.S. support for the war and growing pressure from Congress for Iraq's government to make some political progress, or lose U.S. backing. Many critics say the U.S.- and Iraqi-led security push and troop buildup is also struggling.

In March, lower-level U.S. and Iranian diplomats did hold rare, brief talks on the sidelines of a Baghdad gathering. At a follow-up conference a week ago in Egypt, there was a casual chat between the U.S. ambassador to Iraq, Ryan Crocker, and Iran's deputy foreign minister, Abbas Araghchi.

There had been speculation of a Cabinet-level meeting at that Egypt conference, but neither Secretary of State Condoleezza Rice nor Iran's foreign minister wanted to make the initial move, passing up what would have been the first high-level, face-to-face talks since the U.S. broke off relations with Tehran after the 1979 hostage crisis.

Until this spring, the Bush administration had dismissed calls for both outreach to Iran and Syria. At the Egyptian conference, Rice did sit down for a talk with Syria's top diplomat.

The timing of the upcoming talks in Baghdad was unclear, but Johndroe and Iraq's foreign minister, Hoshyar Zebari, both said they expected them to occur sometime in the next few weeks. The talks could be between Crocker and the Iranians, Johndroe said.

The Baghdad setting will allow for "serious, quiet and focused discussions on the responsibilities and the obligations of all to help stabilize the situation in Iraq," Zebari said.

Despite the planned talks, mutual suspicion and tension between the two countries runs high.

During a visit to the United Arab Emirates, hard-line Iranian President Mahmoud Ahmadinejad demanded Sunday that the U.S. leave the Middle East — two days after Cheney warned Tehran that Washington will not allow it to develop nuclear weapons or dominate the region.

"We are telling you to leave the region. This is for your benefit and the benefit of your nation," Ahmadinejad told the crowd at a soccer stadium in Dubai.

Iran has stressed that it sees the U.S. military presence in Iraq as a serious threat to its security. More than 140,000 U.S. troops are in Iraq — with more expected this month as part of a stepped-up Baghdad security operation.

The U.S. sees Iran as the biggest threat to Iraq's stability, accusing Tehran of supplying Shiite militias with deadly roadside bombs that kill American troops. Iran denies the accusations.

____

Associated Press writers Tom Raum in Cairo, Egypt; Jim Krane in Dubai, United Arab Emirates; Kim Gamel in Baghdad; and Ben Feller in Jamestown, Va. contributed to this report.

The United States ambassador in Baghdad said he and his Iranian counterpart agreed broadly on policy toward Iraq during four-hour groundbreaking talks on Monday, but insisted that Iran end its support for militants.

The Iranian ambassador later said the two sides would meet again in less than a month.

Hassan Kazemi Qomi, the Iranian envoy, also said that he told the Americans that his government was ready to train and equip the Iraqi army and police to create "a new military and security structure."

Kazemi did not elaborate nor would he say how U.S. Ambassador Ryan Crocker responded.

The Baghdad talks were the first of their kind and a small sign that Washington thinks rapprochement with Iran is possible after more than a quarter-century of diplomatic estrangement that began with the 1979 Islamic revolution.

"The next meeting will occur in Iraq in less than one month," Kazemi told an Associated Press reporter after his news conference at the Iranian Embassy.

Crocker earlier said the Iraqis planned to propose a second session and that the United States would decide upon a follow-on meeting when the invitation was issued.

"We will consider that when we receive it," Crocker told reporters in the U.S.-controlled Green Zone. "The purpose of this meeting was not to arrange other meetings."

Crocker described the session as businesslike and said Iran proposed setting up a "trilateral security mechanism" that would include the U.S., Iraq and Iran, an idea he said would require study in Washington.

The U.S. envoy also said he told the Iranians their country needed to stop arming, funding and training the militants. The Iranians laid out their policy toward Iraq, Crocker said, describing it as "very similar to our own policy and what the Iraqi government have set out as their own guiding principles."

He added: "This is about actions not just principles, and I laid out to the Iranians direct, specific concerns about their behavior in Iraq and their support for militias that are fighting Iraqi and coalition forces."

Kazemi did not raise the subject of seven Iranians now in American custody in Iran, Crocker said: "The focus of our discussions were Iraq and Iraq only."

House Speaker Nancy Pelosi (news, bio, voting record), who was criticized by the White House for her trip to Syria — also a U.S. rival — praised the Bush administration for holding Monday's talks.

"I think it's very important, and at the end of the day we want to know that every remedy, every diplomatic remedy has been exhausted," she said in Berlin.

The talks were held at Iraqi Prime Minister Nouri al-Maliki's Green Zone office.

Al-Maliki did not attend the meeting, but the prime minister greeted the two ambassadors, who shook hands, and led them into a conference room, where the ambassadors sat across from each other.

Before leaving, al-Maliki told both sides that Iraqis wanted a stable country free of foreign forces and regional interference. The country should not be turned into a base for terrorist groups, he said. He also said that the U.S.-led forces in Iraq were only here to help build up the army and police and the country would not be used as a launching ground for a U.S. attack on a neighbor, a clear reference to Iran.

"We are sure that securing progress in this meeting would, without doubt, enhance the bridges of trust between the two countries and create a positive atmosphere" that would help them deal with other issues, he said.

Speaking in Tehran, Iranian Foreign Minister Manouchehr Mottaki said the United States should admit its Middle East policy has failed.

"We are hopeful that Washington's realistic approach to the current issues of Iraq by confessing its failed policy in Iraq and the region and by showing a determination to changing the policy guarantees success of the talks and possible further talks," Mottaki said.

Monday's talks, as predicted, had a pinpoint focus: What Washington and Iran — separately or together — could do to contain the sectarian conflagration in Iraq.

"The American side has accusations against Iran and the Iranian side has some remarks on the presence of the American forces on Iraqi lands, which they see as a threat to their government," said Ali al-Dabagh, an Iraqi government spokesman.

But much more encumbered the narrow agenda — primarily Iran's nuclear program and Iranian fears that the Bush administration will seek regime change in Tehran as it did against Saddam Hussein in Iraq.

Washington and its Sunni Arab allies, on their side, are deeply unnerved by growing Iranian influence in the Middle East and the spread of increasingly radical Islam.

Compounding all that is Iran's open hostility to Israel.

Other issues clouding the talks included U.S. Navy exercises in the Persian Gulf last week and tough talk from President Bush about new U.N. penalties over the Iranian nuclear program. The United States says Iran is trying to build a bomb; Iran says it needs nuclear technology for energy production.

Further complicating the talks, Iran said Saturday it had uncovered spy rings organized by the United States and its Western allies.

The United States urged Iran on Monday to stop supporting militias in Iraq in the most high-profile meeting between the two countries in almost 30 years that both sides later described as positive.

The rare talks in Baghdad were narrowly focused on Iraq's spiralling sectarian violence and did not touch on Iran's controversial nuclear program, which has ratcheted up tensions between the two arch foes in recent months.

"Positive" was how both sides characterized the four-hour meeting that began with a handshake between U.S. ambassador to Iraq Ryan Crocker and his Iranian counterpart Hassan Kazemi-Qomi at Iraqi Prime Minister Nuri al-Maliki's office in Baghdad.

In new violence in Iraq, a truck bomb exploded near an important Sunni Muslim mosque in central Baghdad, killing 24 people and wounding 68 others shortly after the talks broke up.

The Iranians appeared keen for further talks, with Kazemi-Qomi calling the meeting "a first step in negotiations between these two sides" and saying Tehran would seriously consider an Iraqi invitation for further discussions.

For his part, Crocker said he had been less interested in arranging further meetings than laying out Washington's case that Shi'ite Iran is arming, funding and training Shi'ite militias in Iraq, a charge Iran denies.

He said he did not produce any evidence, although the U.S. military has previously displayed what it says are Iranian-made rockets, mortars and roadside bombs seized in Iraq. The military says the bombs have killed scores of American soldiers.

"The purpose of this effort was not to build a legal case. Presumably the Iranians know what they are doing. Our point was simply to say we know as well. We wanted to say it is dangerous for Iraq and dangerous for the region," Crocker said.

"The talks proceeded positively. What we need to see is Iranian action on the ground. Right now their actions are running at cross purposes to their stated policy."

Kazemi-Qomi, speaking at a separate media conference several hours later, said Iran also saw positive steps in the talks.

"Some problems have been raised and studied and I think this was a positive step ... In the political field, the two sides agreed to support and strengthen the Iraqi government, which was another positive item achieved in these talks," he said.

He said Iran had offered to help train and arm Iraq's security forces, presently the job of the U.S. military.

The meeting marked a shift in the U.S. policy of shunning almost all contact with Iranian officials since Washington severed formal diplomatic ties with Tehran in 1980, 14 months after Iran's Islamic Revolution and five months after Americans were seized in a hostage crisis at the U.S. embassy in Tehran.

Crocker said he would refer to Washington a proposal by the Iranians for a mechanism with Iranian, U.S. and Iraqi participation to coordinate Iraqi security matters.

DANGEROUS

He said he had told the Iranians they must end their support for the militias, stop supplying them with explosives and ammunition and rein in the activities of Iran's Revolutionary Guards Qods Force in Iraq.

The Iranians had rejected the allegations but did not respond in detail. In turn, they had criticized the "occupying" U.S. military's training and equipping of the new Iraqi army, saying it was "inadequate to the challenges faced."

"In terms of what happens next we are going to want to wait and see not what is said next but what happens on the ground, whether we start to see some indications of change of Iranian behavior," Crocker said.

In a brief address to the delegations before the start of the talks, Maliki said Iraq would not be a launchpad for any attacks on neighboring states, an apparent reference to Iranian fears of a U.S. attack. It would also not brook any regional interference in its affairs, he added.

U.S. and Iranian officials had said they did not expect any breakthroughs from the talks, which come as U.S. warships hold war games in the Gulf and after Tehran said it had uncovered spy networks on its territory run by Washington and its allies.

While mid-ranking officials from Iran and the United States have met occasionally in the past, Monday's talks are the most high profile since the 1979 Islamic Revolution.

(With additional reporting by Mariam Karouny, Mussab Al-Khairalla and Paul Tait in Baghdad and Edmund Blair in Tehran)

Secretary of State Condoleezza Rice on Thursday accused Iran of "lying" about the aim of its nuclear program, saying there's no doubt Tehran wants the capability to produce nuclear weapons and has deceived the U.N.'s atomic watchdog about its intentions.

"There is an Iranian history of obfuscation and, indeed, lying to the IAEA," she said, referring to the International Atomic Energy Agency.

"There is a history of Iran not answering important questions about what is going on and there is Iran pursuing nuclear technologies that can lead to nuclear weapons-grade material," Rice told reporters aboard her plane as she headed to Moscow.

U.S. officials have long accused Iran of trying to develop nuclear weapons behind the facade of a civil atomic energy program, charges that Tehran denies. But Rice's strong words, including the blunt reference to Iranian "lying," come at a critical time in dealing with the matter.

The United States is trying to win Russian support for new U.N. sanctions against Iran but has faced sharp resistance from Moscow, which has nuclear cooperation agreements with Tehran and argues the country should be given more time to come clean on its programs.

Russian President Vladimir Putin said this week there is no proof Tehran is trying to build the bomb. Rice and Defense Secretary Robert Gates are scheduled to see him in Moscow on Friday.

Washington has been pressing for more sanctions since earlier this year.

But last month, the five permanent members of the U.N. Security Council — Britain, China, France the United States and Russia — and Germany agreed with the support of the European Union to hold off on a new sanctions resolution until November to allow negotiations with Iran to continue.

If no progress is made on two separate tracks — talks with E.U. foreign policy chief Javier Solana on an offer of assistance in exchange for a suspension in Iran's nuclear program and discussions with IAEA on its past activities — they are to bring the resolution to a vote.

It remains unclear, though, if Russia and China, which also opposes sanctions, will support it.

Even as work on the proposed resolution is to continue at an Oct. 17 meeting of senior diplomats in Europe, Putin said Wednesday that Russia was not convinced Iran is trying to create nuclear weapons.

His comments came after talks with French President Nicolas Sarkozy, whose government is firmly behind the U.S. sanctions drive, and appeared to deal a new blow to efforts to forge a consensus.

"We have no objective data that Iran is seeking to make atomic weapons," Putin said. "Therefore, we proceed from the assumption that Iran has no such plans."

Rice, however, stressed that Russia had signed on to the Sept. 28 agreement to consider new sanctions in November and said she did not "expect that there is any deviation from that course at this point" from the Russian side.

She also noted that Russia had in the past demonstrated its concern about Iran's program by limiting its cooperation to prevent Tehran from acquiring a full nuclear fuel cycle that could be used to produce weapons-grade material.

"That concern was seen very clearly in Russia's offer to Iran to enrich and reprocess in a joint venture and to bring back any spent fuel so that the fuel cycle wouldn't be available to Iran," she said. "I think there is a reason for that and that is suspicion about Iran's intentions."

U.S. President George W. Bush warned on Wednesday a nuclear-armed Iran could lead to World War III as he tried to shore up international opposition to Tehran amid Russian skepticism over its nuclear ambitions.

Bush was speaking a day after Russian President Vladimir Putin, who has resisted Western pressure to toughen his stance over Iran's nuclear program, made clear on a visit to Tehran that Russia would not accept any military action against Iran.

At a White House news conference, Bush expressed hope Putin would brief him on his talks in Tehran and said he would ask him to clarify recent remarks on Iran's nuclear activities.

Putin said last week that Russia, which is building Iran's first atomic power plant, would "proceed from the position" that Tehran had no plans to develop nuclear weapons but he shared international concerns that its nuclear programs "should be as transparent as possible."

"The thing I'm interested in is whether or not he continues to harbor the same concerns that I do," Bush said. "When we were in Australia (in September), he reconfirmed to me that he recognizes it's not in the world's interest for Iran to have the capacity to make a nuclear weapon."

Bush, who has insisted he wants a diplomatic solution to the Iranian issue, is pushing for a third round of U.N. sanctions against Iran.

Russia, a veto-holding member of the Security Council, backed two sets of limited U.N. sanctions against Iran but has resisted any tough new measures.

Stepping up his rhetoric, Bush said a nuclear-armed Iran would pose a "dangerous threat to world peace."

"We've got a leader in Iran who has announced that he wants to destroy Israel," he said. "So I've told people that, if you're interested in avoiding World War III, it seems like you ought to be interested in preventing them from having the knowledge necessary to make a nuclear weapon."

PUTIN'S "SPECIAL MESSAGE"

Iran rejects accusations it is seeking to develop a nuclear bomb, saying it wants nuclear technology for peaceful civilian purposes such as power generation, and has refused to heed U.N. Security Council demands to halt sensitive uranium enrichment.

Chief Iranian nuclear negotiator Ali Larijani was quoted by Iran's official IRNA news agency on Wednesday as saying that Putin had delivered a "special message" on its atomic program and other issues. No other details were given.

Putin's visit on Tuesday was watched closely because of Moscow's possible leverage in the Islamic Republic's nuclear standoff with the West. It was the first time a Kremlin chief went to Iran since Josef Stalin in 1943.

Asked about Putin's "special message," U.S. State Department spokesman Tom Casey said he was not aware of any deal or offer put forward by Moscow to Tehran over the nuclear program.

On Russian opposition to Caspian Sea states being used to launch attacks against Iran, Casey reiterated that Bush kept all his options on the table but that the United States was committed to the diplomatic path with Tehran.

(Additional reporting by Frederick Dahl in Tehran and Sue Pleming in Washington)

The head of the UN's atomic watchdog said Thursday the agency was still unable to confirm that Iran's nuclear drive is entirely peaceful, despite increased cooperation from Tehran in key areas.

The International Atomic Energy Agency (IAEA) "has so far not been able to verify some important aspects of Iran's nuclear programme," its director general Mohamed ElBaradei told a board meeting here.

He specifically cited key questions related to the scope and nature of Iran's centrifuge enrichment activities, "as well as those relevant to alleged studies and other activities that could have military applications".

As a result, the UN watchdog was "unable to provide credible assurance about the absence of undeclared nuclear material and activities." Such assurances were "crucial... to restore confidence in the peaceful nature of Iran's nuclear programme," ElBaradei said.

The Egyptian-born diplomat noted that the IAEA had seen an increased level of cooperation from Iran in answering questions about the past, but its knowledge of Tehran's current programme has "diminished" since 2006.

One western diplomat, speaking on condition of anonymity, said the conclusions were a source of grave concern for many board members.

"No-one can deny there have been one or two results in a modest sense," he said.

"But looking at the big picture, a lot these are answers to questions we should have had years ago. None of this is doing anything to improve our confidence that Iran is actually engaging (with the IAEA) with any great sincerity or any great commitment," the diplomat said.

The main bone of contention in the nuclear stand-off is Iran's adamant refusal to suspend its enrichment activities, a potential pathway to developing the atom bomb.

In fact, Tehran has actually stepped up such activities, flying in the face of UN demands to stop or face fresh UN sanctions.

Iran's UN envoy to the IAEA, Ali-Asghar Soltanieh, told reporters that Tehran had provided "all the information" the IAEA had requested and also allowed access to all the necessary sites.

"We have provided all the information and the agency has been visiting all workshops producing centrifuge machines, every piece of it," Soltanieh told reporters, referring to the centrifuges that are used to enrich uranium,

In fact, from Tehran's point of view, the centrifuge issue was "closed," Soltanieh insisted.

But such was not the feeling of the board, the western diplomat said.

ElBaradei's report is "very clearly not saying we've got as far as we get on this question and we know all we need to know," he said.

In terms of glasses that are half full or half empty, "the percentage of fullness we're looking at is probably no more than eight, nine or 10 percent," the diplomat said.

And if Iran failed to recoup that so-called "confidence deficit" soon, western countries would move ahead with their drive for further sanctions, he added.

For his part, Iran ambassador Soltanieh warned that any talk of possible sanctions would be counterproductive.

If there was "peaceful dialogue and negotiation, then we show utmost flexibility as we have done" so far.

"But if you're going to use the language of threat or sanction, that will be counterproductive and it will definitely not work," Soltanieh said.

Iran's top nuclear negotiator Saeed Jalili and EU foreign policy chief Javier Solana are expected to meet on or around November 30 for talks on the nuclear issue.

Solana has been trying to persuade Tehran to resume talks on suspending uranium enrichment in exchange for a package of political and economic incentives, but Tehran has refused to offer concessions.

Solana must report the outcome of his efforts to the UN Security Council by the end of November.

Russia's delivery of nuclear fuel to the Bushehr power station makes it unnecessary for Iran to pursue its enrichment program, Russian Foreign Minister Sergei Lavrov was quoted as saying on Wednesday.

Lavrov, interviewed by the Moscow daily Vremya Novostei, also said any suggestion of "regime change" in Tehran had to be ruled out in discussions on verifying Iran's nuclear program.

"We believe that Iran has no economic need to proceed with its program of uranium enrichment," Lavrov told the daily.

"We are trying to persuade the Iranians that freezing the program is to their advantage as it would immediately lead to talks with all countries of the "six," including the United States."

Such talks, he said, would aim to end any suspicion that Iran had any secret aim to produce nuclear weapons. "Iran's agreement to this proposal is in everyone's interest."

Iran was aware, he said, that should there be any deviation from agreements to build Bushehr under the supervision of the International Atomic Energy Agency, "we will freeze our cooperation."

Russia this month delivered the first shipment of 80 metric tons of nuclear fuel to Bushehr, which Russian engineers are building under a $1 billion contract.

U.S. President George W. Bush said the delivery could help international efforts to persuade Iran to halt enrichment, but a senior Iranian official said the delivery had nothing to do with any decision on the program.

The U.N. Security Council has imposed two sets of sanctions on Iran for its refusal to halt enrichment.

In his comments, Lavrov said the six countries dealing with Iran -- Britain, China, France, Germany, Russia and the United States -- had a mandate to assess Tehran's program and there could be no talk of trying to change Iran's leadership.

"If, in fulfilling these declared aims, our American partners pursue the aim of regime change, this would be an improper partnership," he told Vremya Novostei. "This would be an alteration of policies and we would oppose it."

(Writing by Ron Popeski, editing by Tim Pearce)

Two of the U.S. military's most prominent voices on Middle East issues are holding out the prospect of improved relations with Iran despite tensions over its nuclear and military ambitions.

Army Lt. Gen. Martin Dempsey, acting head of the U.S. Central Command, said in an Associated Press interview that Washington and Tehran could seek common ground on tough issues like combating the illicit drug trade in Afghanistan if Iran would stop its "malign activity" inside Iraq.

And Army Gen. David Petraeus, who is expected to win Senate confirmation as the permanent head of Central Command, told the Senate Armed Services Committee on Thursday that although Iran is fueling proxy wars in the Middle East he sees a possibility of "more constructive relations."

Their remarks reflect a U.S. effort — from President Bush and Defense Secretary Robert Gates on down — to highlight Iranian activity that Washington deems harmful in Iraq, Lebanon and elsewhere in the Middle East while also encouraging Tehran to change its behavior.

At a time of growing speculation that Iran and the United States are edging closer to open conflict, the generals' comments appear hopeful, perhaps indicating a view that there is a reasonable prospect of avoiding war by using diplomatic and other means to nudge Iran in a new direction.

Dempsey, whose Central Command area of military responsibility features numerous interrelated problems, including the Israeli-Palestinian conflict, said it is clear Iran is exerting its influence across the region, from Lebanon to Iraq and possibly even into western Afghanistan.

Even so, Dempsey said in the interview Wednesday at his Central Command headquarters in Tampa, Fla., that he believes there are "plenty of opportunities to have some region-altering events." He cited as an example the announcement that Syria and Israel were negotiating a peace deal.

"There is even reason to find common ground with Iran on certain issues, like counter-narcotics," he said. "But it's pretty difficult to do that when (U.S.) soldiers are dying because of lethal munitions provided by them."

Dempsey was referring to U.S. allegations that Iran is training Iraqi Shiite militiamen and providing them with rockets, mortars and technology for a particularly deadly type of roadside bomb.

The narcotics trade that stems largely from vast opium harvests in Afghanistan is an issue of great interest to both the United States and Iran, Dempsey said. The U.S. government sees stopping it as central to transforming Afghanistan's meager economy and supporting the country's political development.

"Iran has a vested interest in actually getting rid of the poppy because that's where it ends up," Dempsey said. "There are opportunities in the region for finding common interests with Iran. But we can't act on those opportunities in the face of such malign activity inside of Iraq."

Dempsey said Iran is a problem to be viewed in a regional context.

"We've got to counter Iranian influence inside Iraq because Iran very clearly sees it as in their interest to keep the level of violence up and to keep the Shiite parties at odds and to try to discredit U.S. forces and U.S. policy in the region," he said. "It's going to take an acknowledgment on the part of the Iraqis and the regional partners that this is a destabilizing influence across the region."

In his opening statement to his Senate confirmation hearing, Petraeus made a similar point about Iran.

"It persists in its non-transparent pursuit of nuclear technology and continues to fund, train and arm dangerous militia organizations," Petraeus said. "Iran's activities have been particularly harmful in Iraq, Lebanon, the Palestinian territories and Afghanistan. In each location, Tehran has, to varying degrees, fueled proxy wars in an effort to increase its influence and pursue its regional ambitions."

He added, however, that there is room to hope for change.

"Even as we work with leaders in the region to help protect our partners from Iranian intimidation or coercion, however, we must also explore policies that over the long term offer the possibility of more constructive relations, if that is possible," Petraeus said. "Together with regional and global partners, we need to seek ways to encourage Iran to respect the integrity of other states, to embrace nonproliferation of nuclear weapons, and to contribute to regional stability rather than regional instability."

Dempsey was thought to have been in the running to succeed Navy Adm. William J. Fallon as commander of Central Command after Fallon resigned abruptly in March, but Bush instead nominated Petraeus, the more widely known commander of coalition forces in Iraq.

Fallon quit after a magazine report cast him as resisting a White House inclination to go to war with Iran.

Because Petraeus is not expected to move from Iraq to Central Command until September, Dempsey is in the unusual position of heading the command for several months with his successor in waiting. If Petraeus takes command in September as expected, Dempsey will move to a post for which he was confirmed by the Senate in March: commander of U.S. Army Europe, a four-star post.

In the AP interview, Dempsey said he is determined to stay in close touch with his counterparts in the Middle East, as well as in Afghanistan, Pakistan and other nations in Central Asia.

"It's all about continuity and commitment," he said, alluding to the transition from Fallon to Petraeus.

He took that message on a journey last week that included stops in Afghanistan, Iraq and Lebanon, and he said he will reinforce it during another trip next week to Egypt, Saudi Arabia, Jordan and Afghanistan.

Military action against Iran would be a last resort but the United States and its allies have not done enough to promote the alternative, a former U.S. ambassador to the United Nations said on Wednesday.

John Bolton, who was a leading hawk in President George W. Bush's administration, told an audience at the Hay literary Festival that five years of "failed" negotiation with Iran over its nuclear program had left just two options for dealing with the issue -- regime change and use of force.

"The use of military force is an extremely unattractive option and only to be used as a last resort," he said, adding he would favor regime change.

Bolton said the elements for regime change were present in Iran -- the economy was in difficulties, young Iranians could see the possibility of a different life and there were ethnic tensions within the country.

But he added that the United Nations and its allies had not done enough to bring about the required change.

"I wish that we had had a much more vigorous policy five years ago," he said.

Bolton, in Hay to promote his book "Surrender is not an Option," said the insistence of Britain, France and Germany on trying to negotiate a solution with Iran and U.S. acquiescence in this policy had failed.

"Today Iran is five years closer to having a nuclear weapons capability," he said.

Western leaders fear Iran aims to build atomic weapons and the United Nations has hit Tehran with three rounds of sanctions since 2006, demanding it cease nuclear enrichment activities. Tehran has refused, saying its nuclear program is peaceful.

Bolton, who was also Under-Secretary of State under Colin Powell at the time of the 2003 U.S.-led invasion of Iraq, was jeered by protesters shouting "war criminal" as he left the stage.

(Reporting by Nigel Stephenson; Editing by Ibon Villelabeitia)

Israeli defense officials and political pundits rounded on Deputy Prime Minister Shaul Mofaz on Sunday after he threatened attacks against Iran, accusing him of exploiting war jitters to advance his personal ambitions.

Mofaz, a former armed forces chief and likely challenger to the Prime Minister Ehud Olmert in their Kadima party, said in a newspaper interview last week that Israeli strikes on Iran looked "unavoidable" given progress in its nuclear plans.

The remarks helped drive up oil prices by nearly 9 percent to a record $139 a barrel on Friday and drew a circumspect response from Washington, which has championed U.N. sanctions against Iran and only hinted force could also be a last resort.

While the White House suggested Mofaz was giving voice to the Jewish state's fear of the Islamic republic, officials in Israel's Defence Ministry pointed to a power-struggle roiling centrist Kadima as Olmert tries to beat off a bribery scandal.

"Turning one of the most strategic security issues into a political game, using it for the internal purposes of a would-be campaign in Kadima, is something that must not be done," Deputy Defence Minister Matan Vilnai told Israel Radio.

The state-owned broadcaster quoted another senior defense official as saying Mofaz's interview "did not reflect policy" and "risked making it even harder for Israel to persuade more countries to step up their sanctions against Iran."

Asked about the flurry of criticism, Mofaz aide Talia Somech said he had spoken "out of his more than 40-year-long commitment to the national security of Israel."

"We would like his statements to be taken at face value, and not be given alternative interpretations," she told Reuters.

Iranian-born Mofaz had served as defense minister until Olmert made him transport minister in a 2006 cabinet reshuffle.

CHALLENGE

Though Iran denies seeking nuclear weapons, the virulently anti-Israel statements of its government pose a challenge for Israeli leaders, who must at once reassure their public while trying to keep in sync with U.S. interests in the Middle East.

Israel, which is assumed to have the region's only atomic arsenal, bombed an Iraqi reactor in 1981 and, last September, a Syrian target which the Bush administration described as a North Korean-built reactor. Damascus denied having such a facility.

But many independent analysts say Iran's nuclear sites are too numerous, distant and fortified for Israel to take on alone. Iran, for its part, has threatened to retaliate for any attack with missile salvoes against Israel and U.S. assets in the Gulf.

The mass-circulation Israeli daily Maariv devoted a full spread to the fallout from Mofaz's interview with the rival Yedioth Ahronoth. Maariv's headlines -- "Big Mouth," "Demonstrable Damage" and "Boomerang" -- made clear its views.

"Were Mofaz defense minister today, he would demand that the transport minister be fired forthwith," wrote Maariv's Ben Caspit. "Suddenly, (Iranian President Mahmud) Ahmadinejad is the underdog. Iran is on the defensive from crazed Jews."

There was agreement from Yedioth's economic analyst, Sever Plotzker, who suggested that Mofaz was, paradoxically, giving a back-end boost to Iran -- the world fourth-biggest oil producer:

"Blathering away about how 'we'll attack and destroy you' does not deter the decision-makers in Tehran, but it does drive the oil markets crazy ... And who profits from that? Tehran."

(Editing by Ibon Villelabeitia)

Iran test-fired nine missiles Wednesday, including ones capable of hitting Israel, making a dramatic show of its readiness to strike back if the United States or Israel attacks it over its nuclear program.

The launches sparked strong U.S. criticism and a jump in oil prices — underlining fears Iran might seal off the Strait of Hormuz, the Gulf waterway through which 40 percent of the world's crude passes, if military conflict does break out.

The tests of the long- and medium-range missiles did not appear to mark a significant advance in Iran's missile capability — similar ones have been tested previously. But the timing and location were clearly aimed to send a message, coming as Iran has sharply stepped up the tone of its warnings of retaliation if attacked. This week, a top official of Iran's Revolutionary Guards, Ali Shirazi, warned Tel Aviv would be "set on fire" in any Iranian retaliation.

The tests took place amid a military exercise that Iran has been conducting in the Hormuz strait, where Tehran has threatened to block oil traffic in response to any U.S. or Israeli military action.

Iran has long warned it would strike back for any attack against it. But it has sharpened its rhetoric since Israel's military sent warplanes over the eastern Mediterranean in June for a large military exercise that U.S. officials described as a possible rehearsal for a strike on Iran's nuclear facilities.

Gen. Hossein Salami, the Revolutionary Guards air force commander, said Iran's war games this week — code-named "Noble Prophet" — "demonstrate our resolve and might against enemies who in recent weeks have threatened Iran with harsh language," state TV reported.

"Hundreds and maybe thousands of missiles are ready to be fired at specified targets," he said. "A small part of our defense options was put on display for the world today. Our real reaction against enemy threats will be quicker and stronger."

The West needs to "assess Iran's might accurately," he added.

State TV aired footage of at least six missiles being fired simultaneously, and said the barrage included a new version of the Shahab-3 missile, which officials have said has a range of 1,250 miles and is armed with a 1-ton conventional warhead. That would put Israel, Turkey, the Arabian peninsula, Afghanistan and Pakistan within striking distance. The TV report did not say whether the test took place near the Hormuz strait.

The U.S. Defense Department said it was studying the test to determine exactly what was launched and what it shows about Tehran's missile capabilities.

Secretary of State Condoleezza Rice called Wednesday's tests "evidence that the missile threat is not an imaginary one."

"Those who say that there is no Iranian missile threat against which we should build a missile defense system perhaps ought to talk to the Iranians about their claims," Rice said while traveling in Sofia, Bulgaria.

On Tuesday, Rice and Czech counterpart Karel Schwarzenberg signed a deal allowing the U.S. to base a missile defense shield in the Czech Republic.

Defense Secretary Robert Gates said the test bolsters the U.S. argument that Tehran is a threat and a missile defense system is needed in Europe.

A White House spokesman called the tests "completely inconsistent with Iran's obligations to the world" and said they further isolate the country.

Iran should "refrain from further missile tests if they truly seek to gain the trust of the world," said Gordon Johndroe, spokesman for the National Security Council, speaking from Japan where President Bush is attending the Group of Eight summit.

Democratic presidential candidate Barack Obama said Iran's missile tests highlight the need for direct diplomacy as well as tougher threats of economic sanctions and strong incentives to persuade Tehran to change its behavior.

John McCain, the Republican seeking the presidency, said the tests demonstrate a need for effective missile defense, including missile defense in Europe and the defense system the U.S. plans with the Czech Republic and Poland. Oil prices rose Wednesday on news of the tests, along with a U.S. government report showing crude stockpiles fell more than expected. Light, sweet crude for August delivery rose $1.50 to $137.54 a barrel in early afternoon trading on the New York Mercantile Exchange.

Israeli defense officials said there were no major surprises in the latest Iranian missile tests. The officials said they appeared to be more of an exercise in psychological warfare than a breakthrough in military technology.

"Israel does not desire hostility and conflict with Iran," Israeli government spokesman Mark Regev said. "But it is clear that the Iranian nuclear program and the Iranian ballistic missile program is a matter of grave concern."

The test could also be aimed to show the West there cannot be a military solution to the standoff with Iran over its nuclear ambitions. Iran denies U.S. accusations it seeks to build nuclear weapons, and earlier this week it sent a response to a Western package of economic incentives aimed at pushing it to halt uranium enrichment. EU officials have said they are still evaluating the response, but Tehran has insisted it will not suspend enrichment.

Iranian leaders have said they don't believe the U.S. or Israel will attack, citing U.S. problems in Iraq and the effect on already soaring oil prices. President Mahmoud Ahmadinejad on Tuesday called the idea of an attack a "funny joke."

But at the same, Iran has been more vocal in warning of the fallout of any U.S. or Israeli strike.

The semi-official Fars news agency, which is believed to be close to the Revolutionary Guards, reported details on the missiles tested Wednesday, saying they included a "newly upgraded" Shahab-3, first tested in its longest-range version in 2004.

The Shehab-3 tested Wednesday has been designed with a "cluster" warhead, that allows it to release multiple bombs over a wider area, Fars said, without elaborating. It also boasts a more accurate navigational system that allows a control room to bring the missile back on route if it strays or destroy it if it goes too far off course, it said.

The other missiles tested included the Zelzal, versions of which have a range of 130-185 miles, and the Fateh, with a range of 105 miles.

A military strike on Iran would be unlikely to force changes in Tehran's nuclear policy, the Rand research organization said on Thursday in an analysis recommending long-term policies to deal with the country.

The United States is leading international efforts to rein in Iran's suspected effort to develop nuclear weapons. Tehran says its nuclear program is for purely civilian energy purposes.

"If Iran's facilities were to be bombed, public support for any retaliation its government took would likely be widespread," the Rand report concluded.

The United States also accuses Iran of arming insurgents in Iraq and meddling in Iraqi politics.

The Rand report came amid increased tensions with Iran, which on Wednesday test-fired nine missiles it said could reach Israel and U.S. assets, and warned Washington and Israel it was ready to retaliate for any attack over its nuclear projects.

"Attacks on Iran proper would generate a great deal of ill-will and, in our view, would be unlikely to change Iranian policy," said the report by the independent research group.

It added that "U.S. policy should focus on creating conditions for effective relations over the long haul."

The report recommended an expansion of contacts and exchanges with Iranian citizens; muting U.S. policy statements advocating "regime change" and penalizing the Iranian government and its officials for pursuing policies that harm U.S. interests.

"The U.S. government has some ability to foster favorable trends in Iran, but these policies will take time to come to fruition," the Rand report concluded.

The New Yorker magazine reported last month the United States was escalating covert operations against Iran aimed at destabilizing its leadership.

The article said U.S. Special Operations Forces had been conducting cross-border operations from southern Iraq since last year.

The U.S. ambassador in Iraq, Ryan Crocker, in a CNN interview last month, denied the allegations of cross-border operations.

(Reporting by JoAnne Allen; Editing by Peter Cooney)

The United States will announce in the next month that it plans to establish a diplomatic presence in Tehran for the first time in 30 years, a British newspaper said on Thursday.

In a front-page report, the Guardian said Washington would open a U.S. interests section in the Iranian capital, halfway towards opening an embassy.

The unsourced report by the newspaper's Washington correspondent said: "The Guardian has learned that an announcement will be made in the next month to establish a U.S. interests section in Tehran, a halfway house to setting up a full embassy.

"The move will see US diplomats stationed in the country."

Senior U.S. diplomat William Burns said in testimony to Congress last week the United States was looking to opening up an interest section in Tehran but had not made a decision yet.

The Guardian said the development was "a remarkable turnaround in policy by President George Bush who has pursued a hawkish approach to Iran throughout his time in office."

Washington said on Wednesday it was sending Burns to join atomic talks with Iran this weekend to signal to Tehran and others that Washington wanted a diplomatic solution to their nuclear impasse.

Iran says its nuclear work is for peaceful power generation, and not for the development of nuclear weapons as the West suspects, and has rejected conditions it give up uranium enrichment.

On Sunday, President Amhmoud Ahmadinejad suggested Iran would consider any proposal by the United States for a U.S. interests section in the Islamic Republic, should one be forthcoming.

U.S. media have reported that the State Department is considering opening an interests section that could mean U.S. diplomats returning to Tehran but operating under another country's flag.

The United States cut off diplomatic ties with Tehran during the 1979-1981 hostage crisis, in which a group of militant Iranian students held 52 U.S. diplomats hostage at the American embassy for 444 days.

Iran maintains an interests section at the embassy of Pakistan in Washington. Mottaki said it serves the large Iranian community in the United States.

(Reporting by Andrew Dobbie; additional reporting by Sue Pleming in Washington; editing by Ralph Boulton)