TEHERAN - THE European Union's top diplomat will on Saturday hand Iran an offer of trade and other benefits from world powers if it suspends nuclear enrichment, which the Islamic Republic has repeatedly refused to do.

EU foreign policy chief Javier Solana arrived in Teheran late on Friday to present an incentives package agreed by the United States, China, Russia, France, Britain and Germany in the latest bid to end a deepening dispute over Teheran's atomic ambitions.

The offer, including civilian nuclear cooperation, is a revised version of one rejected by Iran two years ago.

Seeking to step up the pressure, the United States and the 27-nation EU have threatened more sanctions if Teheran does not stop enriching uranium, which has both civilian and military uses.

Mr Solana says he hopes the incentives package will start a new process for resolving the long-running standoff, which has helped push up crude prices to record highs, but has also played down the prospect for a breakthrough.

Mr Solana, who has said he expects no 'miracles', said the proposals would support Iran in developing a modern nuclear energy programme and also covered political and economic ties.

'I am travelling to Teheran to present a generous and comprehensive offer,' he said in a statement.

'I am convinced that it is possible to change the present state of affairs,' Mr Solana said. 'Our proposal is good for the future of Iran and for the future of the Iranian people.'

The United States, which is leading efforts to isolate Iran over its nuclear ambitions, says it wants to resolve the dispute diplomatically but has not ruled out military action.

The incentives package, hammered out by the six major powers in May, is an updated and enhanced version of an offer spurned by Iran in 2006, which also included wider trade in civil aircraft, energy, high technology and agriculture.

Iran's refusal to stop enrichment, which can provide fuel for power plants or material for bombs if refined much more, has drawn three rounds of United Nations sanctions against the country since 2006.

Mr Solana will be accompanied by senior officials from the major powers with the exception of the United States, which cut ties with Iran after its 1979 Islamic revolution.

On a farewell tour of Europe this week, US President George W. Bush said a nuclear-armed Iran would be 'incredibly dangerous for world peace' and that 'all options are on the table', alluding to military action as a last resort.

Concern in the oil market that Teheran's nuclear dispute with the West may lead to a disruption in its crude exports have helped drive oil to record levels near US$140 (S$193) a barrel, hurting the United States and other consumer nations. -- REUTERS