"I think political directors have made progress. I know there are still some gaps to close," Rice said upon arriving in Berlin ahead of a meeting of the five permanent members of the UN Security Council plus Germany.

"It is my understanding that there is still some way to go," she added.

"I hope even if we don't leave with a resolution that we can give enough direction to the political directors to perhaps do it shortly."

A French diplomat said on Monday that the so-called P5+1 expected to reach agreement in Berlin on a draft UN Security Council resolution on a third round of sanctions against Iran.

"A draft of a third resolution is just about ready," the diplomat said. "I think we will be able to transmit it to the Security Council in the coming days."

Washington and its European Union allies are pushing for further sanctions against Iran for defying international demands to stop uranium enrichment activities that they fear could be used to make a bomb.

But China and Russia, which have lucrative trade ties with the Islamic republic, have been reluctant to back any more punitive measures.

Rice conceded that differences of opinion remain.

"I don't think that it is any secret that we and the Russians and perhaps the Chinese don't have precisely the same view of timing on these resolutions."

She added however: "I don't think there is any disagreement that we ought to be going towards a third resolution."

Iran on Tuesday played down the impact of any new UN Security Council resolution.

"Adoption of a possible new resolution will not have any effect on our people," government spokesman Gholam Hossein Elham told reporters.

Tehran insists its nuclear programme is peaceful and aimed merely at providing energy for its growing population.

Major world powers have offered the Islamic republic a package of political and economic incentives in a bid to persuade Tehran to suspend uranium enrichment, a process that can produce material for a nuclear bomb.

"I think it's a very generous package that the six put forward in June 2006," Rice said.

"If people want to talk about other ideas I am prepared to talk about other ideas but it does not obviate the need for Iran to suspend its enrichment and reprocessing."

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