EU foreign policy chief Javier Solana will present Iran on Tuesday with proposals from six world powers aimed at persuading it to rein in a nuclear program the West fears will lead to it building atomic bombs.

Iranian President Mahmoud Ahmadinejad bows to his supporters during the anniversary of death of late leader Ayatollah Ruhollah Khomeini in Tehran June 4, 2006. [Reuters]

The package of incentives and penalties is intended to get Tehran to abandon uranium enrichment. Iran insists it wants the nuclear fuel only for power plants, not weapons.

The initiative was put together by the three biggest EU states - Britain, France and Germany and then approved by a forum that also included the United States, China and Russia.

"The proposal we bring along, the one that we carry, we think that will allow us to get engaged in that negotiation based on trust and respect and confidence," Solana told reporters in brief comments at the airport.

An EU diplomat in Tehran, who asked not to be identified, said Solana would hand the package to chief nuclear negotiator Ali Larijani on Tuesday. Solana is also due to meet Iranian Foreign Minister Manouchehr Mottaki.

"If their aim is not politicizing the issue, and if they consider our demand, we can reach a logical agreement with them," Mottaki told reporters shortly before Solana arrived.

He did not specify Iran's "demand," but Iranian officials have previously said Iran will not give up uranium enrichment, the package's main requirement.

The United States has said Iran's negative comments so far are probably part of efforts to stake out a negotiating position and urged careful consideration by the Islamic Republic, with which it broke off diplomatic ties in 1980.

Mottaki said discussions on the package would require "shuttle diplomacy" and Iran would have suggestions to make, suggesting no imminent breakthrough.

"After receiving this proposal, Iranian officials will start to review this proposal and we will give our answer at an appropriate time," he said.

Details of the proposals have not been announced, but diplomats have been working on themes ranging from offering nuclear reactor technology to giving security guarantees.

Diplomats in Washington said an arms embargo against Iran was among the possible sanctions if it rejected the offer.

But they said the six powers had pledged to keep details secret until the package was shown to Iran. This was so Iran did not feel compelled to reject any or all of the elements as a face-saving gesture if they were made public first, they said.

The dispute has unsettled jittery oil markets, where traders fear an escalation in the dispute could disrupt supplies from the world's fourth largest oil exporter. The standoff has helped keep oil prices near record levels above $70 a barrel.

Supreme Leader Ayatollah Ali Khamenei, who has the final word in state matters, said on Sunday that oil supplies from the region would be in danger if the United States made a "wrong move" - a veiled threat to use oil as a weapon.

Officials had previously said Iran would not resort to such a measure.

Although the United States insists it wants a negotiated resolution to the nuclear standoff, U.S. officials have refused to rule out a military option if diplomacy fails.