"In the West's proposal, two preconditions are raised: suspending nuclear activities and responding to questions" raised by the International Atomic Energy Agency (IAEA), said Abdolreza Rahmani-Fazli, the deputy secretary of Iran's Supreme National Security Council.

"The leadership has reached the conclusion that it will not accept the precondition set by the Europeans," he was quoted by semi-official Mehr news agency, which is close to the Islamic republic's top national security body.

Although a number of senior officials have over the past month spoken out against a freeze, the comments from Rahmani-Fazli -- the deputy of Iran's top nuclear negotiator Ali Larijani -- are the first indication that the regime has reached a clear decision.

Iran says it only wants to enrich uranium to make reactor fuel, but the process can be extended to make weapons. Western powers believe Iran is trying to build a nuclear bomb under the cover of a peaceful atomic energy programme.

Nevertheless, the official said Iran was "continuing to examine the offer" -- which was drawn up by Britain, China, France, Germany, Russia and the United States and handed to Tehran on June 6.

The package offers trade, technology, diplomatic and other incentives as well as multilateral talks -- also involving the United States -- if Iran agrees to freeze enrichment.

In the absence of an Iranian reply, the so-called 5+1 group of nations on Wednesday decided to send the matter back to the UN Security Council -- which has the power to make a suspension legally binding and impose sanctions if Iran continues enriching.

Diplomats say the Council could vote as early as next week on a draft resolution that would make a freeze mandatory -- although Russian President Vladimir Putin on Saturday emphasised the need for more diplomacy.

"We're not going to take part in any crusades, any holy unions... but our common aim is to make the world a safer place," Putin said after meeting US counterpart George W. Bush ahead of the G8 summit in Saint Petersburg.

"We are going to come up with common approaches to this common problem," Putin said at a press conference.

Iran resumed enrichment in January, and has already ignored a non-binding Security Council demand for the work to stop pending the result of an IAEA probe.

The Vienna-based agency says that after more than three years of inspections it is still not in a position to say whether Iran is seeking nuclear energy or weapons.

The regime's hardline leaders have repeatedly said they are willing to ease concerns over their atomic activities, but are unwilling to accept any "preconditions".

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