Amid mounting tensions with the United States and Europe over its uranium enrichment, Tehran's top nuclear negotiator Ali Larijani told a security conference in Germany on Sunday that Iran was ready to return to the negotiating table.

In Tehran, hardline president Mahmoud Ahmadinejad vowed never to surrender to the West's demand to stop enriching uranium, which makes fuel for civilian power reactors but also atom bomb material.

A diplomat close to the Vienna-based International Atomic Energy Agency (IAEA) explained that the Iranians have "always said they are ready to go back to the negotiating table if they can keep their uranium enrichment."

The United States and its allies say that Iran's enrichment activities hide efforts to build an atomic bomb. Tehran insists its programme is for nuclear power.

Another diplomat in Vienna said the Iranians would not suspend enrichment, as the United Nations has demanded, "unless there is some sort of negotiation."

The diplomats asked not to be named due to confidentiality requirements.

IAEA chief Mohamed ElBaradei had in January proposed a "time out" in the confrontation, after Iran had rejected a December UN Security Council resolution which imposed limited sanctions in a bid to force Tehran to stop enriching uranium.

ElBaradei said that in simultaneous moves Iran should suspend enrichment and the United Nations should hold off on sanctions.

This is unacceptable to the United States which wants Iran to honour the UN resolution's call for it to first, and unconditionally, stop all work on enriching uranium.

In the middle are the European powers, led by Germany, whose goal is to use informal contacts with Larijani to get Iran "to come up with some realistic, achievable proposals," a European diplomat said in Vienna.

Larijani said after meeting with EU foreign policy chief Javier Solana on Sunday for the first time since talks broke down last September that "there is political will on both sides to have a negotiated settlement."

Another diplomat in Vienna said ElBaradei had left his proposal intentionally vague, in order to leave room for "the parties to figure out what they want it to mean."

The Iranians, for instance, might be willing to suspend actual enrichment, that is putting nuclear material into centrifuges for refinement, but would still want to spin centrifuges empty, diplomats said.

The United States rejects this, saying the Iranians could learn about enrichment from spinning centrifuges with a vacuum or an inert gas in the machines.

The IAEA said in an unofficial text supplied to Washington last May, and obtained by AFP, that even reduced enrichment work would help Iran move towards "successful long-term sustained centrifuge operation", which is needed to make enriched uranium.

Another possible area for compromise is whether Iran would be able to suspend enrichment but leave its facilities, such as a huge enrichment plant in Natanz, intact, diplomats said.

The United States wants Iran to eventually dismantle these facilities, while certain European countries might not insist on this.

The Security Council could impose tougher sanctions if a report by ElBaradei later this month shows Tehran continuing to defy it, especially since Iran is pressing ahead with building an underground plant at Natanz for industrial-level uranium enrichment.

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