On Saturday, Iran again ruled out suspending uranium enrichment despite the offer by six world powers of help in developing a civilian nuclear programme if it stopped activities the United States and others suspect are designed to make bombs.
European Union foreign policy chief Javier Solana said after talks in Tehran that Iran should cease uranium enrichment during negotiations on the offer, a precondition the Islamic Republic has repeatedly rejected.
The incentives package agreed by the United States, Russia, China, Britain, France and Germany last month and delivered by Solana to Iranian Foreign Minister Manouchehr Mottaki is a revised version of one rejected by Iran in 2006.
Solana said he expected a reply soon from Iran, which says its nuclear programme is only for the generation of electricity so the world's fourth-largest oil producer can export more crude and natural gas.
Diplomats have played down prospects for a breakthrough in a standoff that has helped send world oil prices to record highs. The United States says it wants a diplomatic solution but has not ruled out military action as a last resort.
"I believe a rejection of this package would lead to further isolation of Iran and would lead to further international sanctions," said a senior US State Department official in Washington, declining to be named.
A top British official said before Solana's Tehran trip: "If they were to reject this initiative, then we would expect there to be further EU sanctions imposed before the end of July."
Iran's refusal to stop enriching uranium, which can be used as fuel for power plants or to provide material for bombs, has drawn three rounds of UN sanctions since late 2006.
US President George W Bush has spent a lot of time during a farewell tour of Europe over the last week trying to forge a united front to press Iran to suspend enriching uranium.
Germany, Italy and France all offered support for efforts to prevent Iran from obtaining nuclear weapons.
"Our allies understand that a nuclear-armed Iran is incredibly destabilising, and they understand that it would be a major blow to world peace," Bush said on Saturday.
The incentives package included help for Iran to develop a civilian nuclear programme with light water reactors – seen as less prone to diversion into bomb-making than technology Tehran now has – and legally-binding nuclear fuel supply guarantees.
"We are offering a proposal which we would like to be the starting point for real negotiations," said Solana.
The six powers were ready to fully recognise Iran's right to have nuclear energy for peaceful purposes, he said.
Flush with record oil revenues that have helped it withstand the UN sanctions, Iran has long ruled out ending its quest for its own enrichment industry.
"Iran's view is clear: any precondition is unacceptable," government spokesman Gholamhossein Elham said when asked about the incentives package. "If the package includes suspension it is not debatable at all."
Mottaki suggested Iran was ready to engage in negotiations, but said its response to the major powers depended on their reaction to Tehran's own package of proposals submitted to the EU and others last month that was designed to end the standoff.
Diplomats say Iran's proposals failed to allay concerns about its uranium enrichment.