European Union foreign policy chief Javier Solana travels to Tehran on Friday to hand over the incentives offer, a revised version of a package rejected by Tehran two years ago.

Solana says he hopes it will start a new process for resolving the long-running standoff diplomatically.

But with the Islamic Republic showing no sign of backing down over a nuclear programme the West suspects is aimed at making bombs, the Spaniard admitted: "I don't expect miracles."

Seeking to step up the pressure as part of carrot-and-stick diplomacy, the United States and the 27-nation EU have warned of more sanctions if Tehran does not stop uranium enrichment.

Iran has ruled this out, saying its atomic drive is solely aimed at generating electricity so that the world's fourth-largest crude producer can export more oil and gas.

"The outcome of these negotiations will certainly never be Iran's surrender to degrading Western demands," senior cleric Ayatollah Ahmad Khatami told the IRNA news agency.

Tehran argues it is its right under international treaties to master the complete nuclear fuel cycle for civilian purposes -- from mining uranium to enriching it. It aims to start test-running its first nuclear power plant at Bushehr this year.

A diplomat said Iran may show a more open attitude as international punitive measures are starting to bite on the $280 billion economy but it is unlikely to yield on enrichment.

Iran's refusal to stop enriching uranium, which can provide fuel for power plants or material for weapons if refined much more, has drawn three rounds of U.N. sanctions since 2006.

Tehran has shrugged off the impact of such measures, saying it earned $70 billion (36 billion pounds) in oil revenue last year. But analysts say the nuclear row is hurting foreign investment in a country also struggling with 25 percent annual inflation.

"INCREDIBLY DANGEROUS"

Solana is due to meet Iran's Foreign Minister Manouchehr Mottaki and chief nuclear negotiator Saeed Jalili on Saturday for talks on the incentives package agreed in May by the United States, China, Russia, Britain, Germany and France.

In Brussels, an EU statement said the proposals seek "to resolve the problems that Iran's nuclear programme raises with the international community and to enter into a normalised relationship with Iran in all areas."

It is an enhanced version of an offer rejected by Iran in 2006, which included civilian nuclear cooperation and wider trade in aircraft, energy, high technology and agriculture.

Mottaki dismissed Western suspicions Iran is seeking to draw out the process while pushing ahead with its atomic activities.

"Iran is not seeking to gain time ... What motivates us is a desire to establish dialogue," he told French daily Le Monde.

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.

U.S. President George W. Bush this week 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 to stop its nuclear programme.

Market concern that the dispute may lead to a disruption in Iran's crude exports have helped drive oil to record levels near $140 a barrel, hurting U.S. and other consumers.

The diplomat in Tehran said he believed that offering Iran security guarantees, an idea floated by Russia, could help end the deadlock: "This is the point that really matters to Iran. As long as they don't feel safe they will not concede," he said.

But the United States last month said major powers had no plans do make such security pledges to Tehran.