"On the nuclear issue, the president reaffirmed to me Iran's preparedness and determination to negotiate and find a solution to the crisis," Annan told a news conference in Tehran.

Annan added that Ahmadinejad had told him Iran "does not accept suspension (of uranium enrichment) before negotiations", as demanded by the U.N. Security Council.

The U.N. chief has been touring the region seeking to shore up the ceasefire that halted a 34-day war in Lebanon. His Iran leg of the trip also came just days after Iran failed to meet a U.N. Security Council deadline to halt sensitive nuclear work.

The U.N. chief held talks on Saturday about the Lebanon truce and the nuclear standoff with senior Iranian officials, including chief nuclear negotiator Ali Larijani, and met with Ahmadinejad on Sunday.

Iran failed to heed an August 31 deadline set by the U.N. Security Council to halt uranium enrichment, a process which can be used to make fuel for power stations or material for warheads. It now faces the threat of sanctions.

The United States said on Friday it was consulting European governments about possible sanctions against the Islamic Republic, but the EU has signaled it wants more dialogue and has agreed to try to clarify Iran's stance within two weeks.

Ahmadinejad has been a staunch opponent of compromise over Iran's nuclear program, which the West says is aimed at building atomic bombs but which Tehran insists is only to produce electricity.

U.N. officials said Annan had also requested to meet Supreme Leader Ayatollah Ali Khamenei, who is the highest authority under the Islamic Republic's system of clerical rule. Khamenei has also said Iran would press ahead with its atomic plans.

U.N. officials said early on Sunday that no meeting with Khamenei had been scheduled so Annan was expected to leave Iran later on Sunday without seeing him.

Iran has repeatedly shrugged off the threat of sanctions, saying they would hurt industrialized countries more than Iran, the world's fourth largest oil exporter, because such a step would drive already high oil prices higher still.

"I think the issue of sanctions is more like a psychological game," Foreign Ministry spokesman Hamid Reza Asefi told a news conference. "Right now we should think about solving the issues through negotiations."

Iran has insisted on holding more talks to resolve the dispute, although some Western diplomats have viewed that as a tactic by Tehran to stall and avoid taking action.

European Union foreign policy chief Javier Solana will meet Larijani in the week ahead to try to clear up ambiguities in Tehran's reply to the major powers' offer of broad cooperation if it stops the nuclear work.

The United States, Russia, China, Britain, France and Germany had offered Iran a package of economic and other incentives to halt enrichment, which Iran insists is its national right that it will never abandon.

/Reuters/