WORLD powers reached a “substantial agreement” last night on a package of incentives to be offered to Iran in exchange for it agreeing to stop part of its controversial nuclear programme. If Iran rejects the offer, as it says it will, the country will be referred to the UN Security Council, where it could face the threat of sanctions.

After months of tortuous diplomacy, the foreign ministers of the US, Britain, China, France, Germany and Russia agreed what was seen as a balanced offer to persuade the Iranian leadership to abandon its uranium enrichment work, which many fear could be a cover for building an atomic bomb.

Margaret Beckett, the Foreign Secretary, said last night that the proposals offered Iran the chance of a negotiated agreement.

“We are prepared to resume negotiations should Iran resume suspension of all enrichment-related and reprocessing activities as required by the [UN nuclear watchdog] and we would also suspend action in the Security Council,” she said.

“We have also agreed that if Iran decides not to engage in negotiation, further steps would have to be taken in the Security Council . . .

“We urge Iran to take the positive path and to consider seriously our substantive proposals, which would bring significant benefits.”

Further details of the deal were not made public after the meeting in Vienna because the offer has not yet been forwarded to President Ahmadinejad, who has previously rebuffed any proposal that would halt his country’s enrichment work.

It is believed, however, that the five permanent members of the Security Council and Germany will offer Iran the opportunity to build a lightwater reactor, which is regarded as a safe option for the country to develop a civilian nuclear power industry.

Iran would also be guaranteed regular supplies of nuclear fuel and the EU would also offer economic incentives to sweeten the package.

The key move was an unexpected gesture by Washington to resume direct talks with Iran and end 27 years of hostility and suspicion between the two nations.

But the package of incentives also came with threats of what would happen if Iran failed to comply. The US and its European allies have been pressing hard for a tough message to be sent to Tehran that if it ignores the will of the international community, it will face economic and other sanctions.

Russia and China, which have lucrative commercial ties with Iran, have been far more cautious about committing themselves to concrete action. Both nations were also considering joining any nuclear talks with Iran, Frank-Walter Steinmeier, the German Foreign Minister, said last night.

Before the deal was concluded in Vienna, Manouchehr Mottaki, the Iranian Foreign Minister, said that Iran would gladly resume bilateral dialogue with the US, but he ruled out any arrangement that would mean Iran abandoning its enrichment work.

Earlier, President Bush, who became personally involved in the diplomatic moves by telephoning his Russian and Chinese counterparts this week to lobby for their support, told Iran that it faced a united front at the UN if it ignored the international community.

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