President Susilo Bambang Yudhoyono said he believed diplomacy could resolve the international stand-off over Iran's ambitions and offered to help mediate in talks.

"Indonesia believes that Iran's nuclear program is peaceful and all problems related to the Iranian nuclear program can be solved in a good manner and diplomatically by involving many parties in the international community," Yudhoyono told a press briefing after meeting Ahmadinejad.

Yudhoyono said Indonesia, the world's most populous Muslim nation, was nevertheless concerned about the ongoing tensions and wanted to help reduce them.

"Indonesia hopes on this critical issue we could cooperate well in reducing the tension, in finding a way to the continuation of talks and negotiation for the benefit of all of us, of our communities in the region, and people all over the world," he said.

His spokesman Dino Patti Djalal told reporters later that Yudhoyono had suggested to Ahmadinejad that representatives of Islamic nations assist in international talks to resolve the crisis.

"Indonesia will be ready," he said, when asked whether the Jakarta government had volunteered itself for the role.

"The sooner (an expanded forum) is formed, the better, and the Iranian president has agreed to the proposal," he added without elaborating.

Iran has refused to meet international demands to end its uranium enrichment work, which Washington and its allies believe hides a nuclear weapons drive. Tehran insists its research is for peaceful purposes.

Ahmadinejad arrived in Indonesia on Wednesday for a five-day visit amid a flurry of diplomacy aimed at halting his country's nuclear programme.

The permanent members of the UN Security Council -- the United States, Russia, China, Britain and France -- plus Germany have been holding talks aimed at thrashing out a united front to deal with Iran's nuclear activities.

Yudhoyono's backing comes two days after the firebrand Iranian leader sent a letter to US President George W. Bush, ending more than 25 years of silence between the two countries at senior level.

Ahmadinejad shrugged off US Secretary of State Condoleezza Rice's dismissal of the letter as containing nothing new.

"If they choose not to answer our questions, it depends on them. We think we have taken a correct decision to send the letter," he said.

Ahmadinejad also reiterated Iran's intention to pursue its nuclear ambitions.

"The resistance of the Iranian people is not only in defence of the rights of the Islamic world but also the rights of all the people in the world," he said in response to a question about Iran's nuclear program.

"We think that this is the right of every nation: to use modern science and technology, and the right has been enshrined in the previsions of the NPT."

Iran says it only wants to enrich uranium to generate atomic energy, as is authorised by the nuclear Non-Proliferation Treaty.

Ahmadinejad said the Iranian people "absolutely will not back off from our own position" and charged that Western nations were "trying to monopolise modern technology and sciences."

"They pretend that they are concerned about the nature of the nuclear program of the Islamic republic of Iran. This is a big lie," he said.

"They want to prevent independent nations from reaching the pinnacle of science and technology so they can sell it to other countries of the world at a very high cost. This is the main reason for the opposition to Iran's nuclear program."

Ahmadinejad witnessed the signing of several agreements with Indonesia Wednesday, including one to develop an oil refinery here worth up to five billion dollars.

The Iranian leader will meet Indonesian and Islamic leaders during appointments through Friday before he flies to Bali to attend a meeting of the Developing-8 (D-8) group of large Muslim countries.

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