Iran, Solana agree to continue talking

Iran ruled out suspending sensitive nuclear work on Saturday, despite an offer by six world powers of trade and other benefits. But Tehran says it wants a diplomatic solution to the standoff that has helped push oil prices to record highs.

European Union foreign policy chief, Javier Solana met with Iran's top nuclear negotiator, Saeed Jalili in Tehran on Saturday.

Their talks came hours after Solana presented Iran a modified package of incentives to suspend uranium enrichment.

But Iran had already ruled out any deal that involved halting enrichment.

Gholam Hussein Elham, Iranian government spokesman, said, "This issue, whether it is in the package or not, can not be on the negotiating table."

The United States and its European allies warned of more sanctions against the Islamic Republic if it rejected the package of incentives.

Nicolas Sarkozy, French President, said, "If Iran's current leaders are in good faith, they should allow inspections to go on right to the end. If they have nothing to hide, they should show it. In the meantime, the only solution to convince the Iranians is to proceed with sanctions without fail."

The incentives package, hammered out by world powers in May, is an updated version of an offer rejected by Iran in 2006 that also included wider trade in civil aircraft, energy, high technology and agriculture.