President Ahmadinejad of Iran said today that he was ready to negotiate with the United States and its allies over his country’s nuclear programme but declared that any threats against Tehran would make dialogue all but impossible.

The combative Iranian leader made his remarks in a speech to cheering students in Indonesia, the world's most populous Muslim nation which has offered to act as an honest broker in negotiations between Iran and Western powers angered by its enrichment of uranium.

Earlier this week, Mr Ahmadinejad offered to open talks with the United States in a letter to President Bush, the first public communication from an Iranian leader to a US president since the Iran hostage drama of 1979.

Asked later in a televised interview what it would take to begin talks with the United States to resolve the standoff, Mr Ahmadinejad told Metro TV that Iran "is ready to engage in dialogue with anybody".

"There are no limits to our dialogue," Mr Ahmadinejad said. "But if someone points a weapon at your face and says you must speak, will you do that?"

The five permanent members of the UN Security Council agreed on Tuesday to postpone a resolution that would have delivered an ultimatum to Tehran, giving Iran another two weeks to reevaluate its insistence on developing its uranium enrichment capabilities.

The Chinese and Russians have balked at British, French and US efforts to put the resolution under Chapter 7 of the UN Charter, which paves the way for sanctions and eventual military action if Tehran refuses to respect an International Atomic Energy Agency (IAEA) moratorium on its nuclear activities.

Mr Ahmadinejad told cheering crowds of students in the Indonesian capital that it was the right of every country - not just the United States - to use new technology to meet energy needs. The United States accuses Iran of seeking to develop nuclear weapons, a charge Tehran denies, saying it only wants to produce low-grade enriched uranium to use in atomic power reactors.

"We are not only defending our rights, we are defending the rights of many other countries," he added. "By maintaining our position, we are defending our independence."

Mr Ahmadinejad's offer of dialogue was welcomed by the head of the IAEA, Mohamed ElBarardei, who appealed today for a spirit of compromise.

Mr ElBaradei, the Nobel Peace Prize laureate, said that he was pleased Security Council was holding off from sanctions against Iran as Europeans work on a package of benefits to induce Tehran to cooperate.

"I’m very optimistic. I hope both sides will move away from the war of words, I hope the pitch will go down, I hope people will adopt a cool-headed approach," he told a news conference at Amsterdam airport."We need compromises from both sides."

"I hope that at this stage we will use more carrots before we think of using sticks," he said. "It is a very good idea that the Security Council is holding its horses."

Mr ElBaradei has said that Iran poses "no imminent threat" and Reuters today cited diplomatic sources as saying that the IAEA chief has privately told Western leaders they may have to accept a limited Iranian enrichment programme under IAEA monitoring as it was a matter of national pride and to insist on scrapping it may only bolster Iranian hardliners.

He and other IAEA veterans were also unhappy about the Security Council’s intervention, fearing that a rush to punish Iran before having found hard evidence of bomb-making could drive it out of the NPT and push its nuclear project underground.

Mr ElBaradei added: "The more we can go back to the negotiating table, the more we can address grievances from both sides.

"Iran owes it to the international community to make sure that its programme is exclusively for peaceful purposes. They have work to do with (the) IAEA to clarify outstanding issues. They have confidence-building measures to take."

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