European Union foreign policy chief Javier Solana delivered the offer to Tehran on Tuesday, with a delegation of senior officials from the "EU3" -- France, Britain and Germany -- and from Russia. Iran said it saw some positive aspects, although there were some "ambiguities."

"This is an offer to kick off negotiations but there must first be a suspension of (enrichment) activities implemented by Iran," Chancellor Angela Merkel told reporters before a meeting with Solana, who was in Berlin.

"It is a broad and comprehensive offer. I believe it is a huge chance and I hope that we'll do a bit of negotiating."

The proposals, which have not been made public but include incentives and penalties, seek to persuade Iran to give up its uranium enrichment program, which many countries fear will be used to build atomic bombs. Tehran insists that its nuclear aims are purely peaceful.

Solana said in an interview to appear in Thursday's Tagespiegel newspaper that what Iran had received were "elements of a proposal which are the basis for later negotiations."

"The package enables Iran to have civilian nuclear energy and access to technology, and it offers economic incentives, above all in the energy sector," the paper quoted Solana as saying.

"Significant chance"

Merkel urged the Iranians to consider the offer seriously, saying this was an opportunity to secure a peaceful resolution to the long nuclear standoff between Iran and the West.

"I believe that it is a truly significant chance to resolve this conflict diplomatically," she said. "And everyone should be aware of his responsibility in this context."

Iranian officials said the incentives included access to aircraft parts needed to renovate its ageing civilian fleet and the chance to purchase U.S. agricultural technology.

EU diplomats have said the package includes an offer of light-water nuclear reactors and security guarantees. Western diplomats said the US was not expected to provide nuclear technology or equipment directly to Iran. Instead, Europeans and Russians would be the prime contractors.

Cautious optimism

On Tuesday, US President George W. Bush said he was encouraged by Iran's initial response although he remained cautious.

"It sounds like a positive step to me," Bush said in Laredo, Texas. "I have said the United States will come and sit down at the table with them as long as they're willing to suspend their enrichment in a verifiable way."

But German Foreign Minister Frank-Walter Steinmeier warned against too much optimism and said he expected a decision from Iran by the time the Group of Eight foreign ministers meet in Moscow at the end of June.