Iran defiant in nuclear row

By Parisa Hafezi and Fredrik Dahl

TEHRAN (Reuters) - Western powers are warning Iran of more sanctions if it rejects an incentives offer and presses on with sensitive nuclear work, but the Islamic Republic is showing no sign of backing down.

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.

"The deadlock is still there," an Iranian political analyst who declined to be named said a day after European Union foreign policy chief Javier Solana delivered the incentives package to Iran's Foreign Minister Manouchehr Mottaki.

Solana said Iran should stop enrichment during negotiations on the offer, a precondition it has repeatedly rejected.

"There is determination that if the Iranian regime rejects the latest offer ... that the consequence of the regime's decision will result in greater isolation," said Stephen Hadley, national security adviser of U.S. President George W. Bush.

Hadley was speaking to reporters aboard Air Force One on Sunday during Bush's farewell tour of Europe, where he received offers of support for efforts to prevent Iran from obtaining nuclear weapons.

Iran's refusal to stop enriching uranium, which it says is only for the generation of electricity but which can also provide material for bombs, has drawn three rounds of U.N. sanctions since 2006.

"Suspension of enrichment is by no means acceptable to Iran," one leading Iranian politician, deputy parliament speaker Mohammad-Reza Bahonar, said.

The package agreed by the United States, Russia, China, Britain, France and Germany last month is a revised version of one rejected by Iran in 2006.

Solana said he expected Iran's reply soon but senior member of parliament Alaeddin Boroujerdi said Tehran was in no hurry.

"They will never accept the proposal as it is," one Western diplomat in Tehran said. "As usual they are playing for time."

"BLOW TO WORLD PEACE"

The United States says it wants a diplomatic solution to a standoff that has helped push oil prices to record highs but has not ruled out military action as a last resort.

Bush said on Saturday a nuclear-armed Iran would be "a major blow to world peace."

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."