The talks, which began in December and are continuing, are deadlocked as Iran refuses the EU's demand for it to permanently abandon uranium enrichment, a crucial part of the nuclear fuel cycle which the United States claims Tehran wants to use to make atomic weapons.

Iran had in November suspended enrichment as a confidence-building measure but says it will resume this activity if talks with the EU negotiators Britain, France and Germany fail to progress. Tehran expects economic and political rewards for its cooperation.

Kharazi said the key was for Iran to find a "mechanism" to reassure the EU it is not trying to make nuclear weapons and "we are hopeful it would lead to a very fruitful agreement," the Iranian foreign minister told a press conference.

In a separate press conference, also in Budapest, Juncker said the key was for "Iran to step away from direct access to nuclear weapons."

The two men had met in Budapest on Monday, Juncker said.

The EU thinks it can "convince Iran... via the channels of negotiations in the next couple of weeks," he said.

But the two also restated the positions that have deadlocked the talks.

Juncker said about Iran's resuming uranium enrichment: "We are trying to convince them to step away not from nuclear ambitions but from the possibility of having access to nuclear weapons. We do not think it would be an element of stability," if they insisted on such access.

Kharazi said the suspension of enrichment was only "for a temporary time... for the time that we are negotiating with each other."

Later Tuesday, after talks in Luxembourg with Deputy Foreign Minister Nicolas Schmit, Kharazi said the negotiation drive with the EU "needs more effort, more seriousness, and more confidence-building to be evaluated as a fruitful and a positive process by mid-March".

But he added: "We are optimistic."

In Tehran on Saturday, Iran's senior nuclear negotiator Hossein Moussavian said after the third round of the EU-Iran talks last week in Geneva that the negotiations could proceed beyond what had been expected to be a March deadline, after starting in December.

"The Iranian delegation made it known to the Europeans that if the talks proceed with the same seriousness, cooperation is likely to continue beyond the initial three months," Moussavian said.

Tehran has insisted the talks must have concrete results if they are to continue, as Iran waits for bonuses such as help in getting into the World Trade Organization (WTO).

Kharazi was set to visit Luxembourg later Tuesday.

"The discussions (in Luxembourg) will broach the European Union's relations with Iran, bilateral relations as well as recent negotiations in Geneva on Tehran's nuclear program," Luxembourg officials said in a statement.

Kharazi was to be accompanied by Deputy Foreign Minister Hamid Reza Asefi.

Iran on Sunday rejected a European offer under which it would give up construction of a heavy-water reactor, which can be used to make nuclear weapons material, in exchange for a light-water reactor offered by the Europeans.

New US Secretary of State Condoleezza Rice last week urged European negotiators to take a tough line with Iran and warned Tehran of UN sanctions if it refused to renounce a suspected nuclear weapons program.

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