US Secretary of State Condoleezza Rice, who unveiled the offer -- 26 years after Washington and Tehran broke off diplomatic relations -- flew into Vienna for talks with her opposite numbers from Britain, China, France, Germany and Russia.

She said the United States would join multi-party talks if Iran suspended its uranium enrichment, the key process behind what Washington suspects is a covert atomic weapons programme but Tehran insists is for peaceful energy.

Iranian Foreign Minister Manouchehr Mottaki rejected those conditions in a first public reaction from Tehran, saying it was ready for talks but unwilling to freeze enrichment.

"We support dialogue in a fair and unbiased atmosphere but we will not talk about our undeniable and legitimate rights, because this is the right of our people according to international laws and treaties," he told reporters.

Nevertheless, diplomats are hopeful the meeting in Vienna could lead to a compromise on a carrots-and-stick approach, with Tehran offered incentives to allay Western fears but the threat of sanctions if it fails to do so.

The talks were due to start at 6:00 pm (1600) at the British ambassador's residence here after a series of consultations between the various sides.

Non-proliferation analyst Mark Fitzpatrick said Washington's about-turn on talks with Iran was a "win-win situation for the Bush administration," as it had now "made a significant concession to agree to engagement as the Russians and many others have been asking."

Fitzpatrick, speaking to AFP from London's Institute for International and Strategic Studies think tank, said Washington "wants the Russians and Chinese to buy in to a UN Security Council resolution" to oblige Iran to suspend its enrichment -- something it has so far refused to do.

Diplomats in Vienna said one compromise could be for Iran to keep spinning centrifuges that enrich uranium but leave them empty of the feedstock uranium gas.

"Renewing feeding is a matter of decision," one said.

The other key issue is the US insistence that Russia and China sign on to Security Council sanctions against Iran if Tehran refuses to accept a package of incentives in return for guaranteeing it would not make nuclear weapons.

The package, drafted by European Union negotiating troika Britain, France and Germany, was at the centre of Thursday's talks here.

Diplomats in Vienna said US participation in multi-party talks depended on Russia and China agreeing to the threat of UN sanctions on Iran.

China, in comments by foreign ministry spokesman Liu Jianchao, welcomed the US offer to join talks with Iran, but said it remained opposed to "arbitrary" sanctions.

Russia meanwhile called on Iran to respond "constructively" to the US call, its foreign ministry said in a statement.

A senior European diplomat said the United States would have a tough time getting Russia and China to agree to a firm commitment to sanctions, outlined in a list the EU troika drew up alongside the incentives package.

The diplomat said that Thursday's meeting, while "important, is not the end of the story."

"What we get now is momentum," the European said.

"Momentum is created. That's the positive thing. But the momentum is not the solution. The hope is that it could initiate a positive reaction."

Fitzpatrick said Russia and China "don't have to sign up to sanctions right now. It's a two-step process."

"What the United States wants is Russian and Chinese agreement on a plan forward that includes as a next step a Security Council resolution making suspension of uranium enrichment mandatory with a short deadline, at the end of which would come a second resolution endorsing sanctions," he added.