The European Union (EU) has pursued a policy of dialogue with Iran, including holding several rounds of talks on a possible trade pact. But EU officials have said Iranian agreement to enhanced inspections is a key demand for trade talks to progress.

   

"If you don't sign the Additional Protocol, it will be bad for you and, second, bad for us," Solana told a news conference in Tehran with Iranian Foreign Minister Kamal Kharazi.

 

Quid pro quo

   

Asked what Iran would get in return for signing, Solana said, "The only thing you have to expect is we continue working as friends."

   

The International Atomic Energy Agency (IAEA) on Tuesday said Iran had improved cooperation, but there were still questions about weapons-grade uranium found at a site in Iran.

   

"We are trying to build the confidence of those who have real concerns but we will not yield to political force"

Muhammad Khatami,        Iranian President

"If that process of enrichment has taken place, this has nothing to do with a programme for peaceful use of nuclear fuel," Solana said.

 

Kharazi repeated Iran's stance that contaminated imported equipment was to blame for the enriched particles.

 

He also said it should be left to the IAEA to judge. The IAEA governors meet in early September to discuss the Iran report.

 

In another meeting, President Muhammad Khatami told Solana that Iran had an absolute right to peaceful nuclear technology.

   

"We are trying to build the confidence of those who have real concerns but we will not yield to political force," Khatami said, adding "Atomic weapons have no place in Iran's defence policy."

 

Access to EU

 

In July, the EU issued its strongest warning so far to Iran about its nuclear programme and human rights and said it would review relations in September in the light of Iran's behaviour.

   

Under the proposed trade pact, Iran would have greater access to the EU, a key Iranian trading partner.

   

Iran says its nuclear programme is civilian. It says it needs nuclear power to meeting booming electricity demand and save its massive oil and gas reserves for exports.

   

Iran faces mounting demands to sign the so-called Additional Protocol and allow short-notice inspections of its facilities, which the US says are used to develop nuclear weapons. Iran denies the charge.