On Monday, Bush turned up the pressure on Tehran, warning of "progressively stronger political and economic sanctions" if it refuses to freeze sensitive nuclear activities in return for talks.

With Iran suggesting that it will soon unveil its own proposal for ending the crisis over its atomic programs, Bush signaled that suspending uranium enrichment and reprocessing was not negotiable.

"If Iran's leaders want peace and prosperity and a more hopeful future for their people, they should accept our offer, abandon any ambitions to obtain nuclear weapons, and come into compliance with their international obligations," Bush said in a speech to the graduating class at the US Merchant Marine Academy in King's Point, New York.

The United States and its partners -- Britain, France and Germany, as well as Russia and China -- have made Iran's suspension of uranium enrichment and reprocessing activities a condition for talks on Tehran's atomic program.

"The United States has offered to come to the table with our partners and meet with Iran's representatives as soon as the Iranian regime fully and verifiably suspends its uranium enrichment and reprocessing," said Bush.

"If Iran's leaders reject our offer, it will result in action before the (UN) Security Council, further isolation from the world and progressively stronger political and economic sanctions," he said.

Iran, which denies US charges that it seeks nuclear weapons under cover of a civilian atomic program, said Monday it was preparing a counter-offer as officials rejected that key stipulation.

"I have a message for the Iranian regime: America and her partners are united. We have presented a reasonable offer. Iran's leaders should see our proposal for what it is: A historic opportunity to set their country on a better course," said the US president.

The US-backed offer, presented to Iran on June 6, involves incentives and multilateral talks if Iran agrees to temporarily halt the sensitive nuclear activity and cooperate with the International Atomic Energy Agency.

Bush also said he respected Iran's "legitimate desire" for civilian nuclear energy -- as long as it comes "with proper international safeguards."

Later in the day, Bush and Russian President Vladimir Putin spoke by telephone and agreed to close ranks on Iran.

"The presidents agreed on the importance of remaining united in their efforts to press Iran to suspend all enrichment activities and begin negotiations on the incentive package," a White House official said.

Bush and Putin also agreed on a common stance with regard to North Korea's nuclear weapons program, the official added.

In Vienna, diplomats told AFP that when EU foreign policy chief Javier Solana presented the US-backed offer on June 6, he told Iran that world powers expected an answer to their offer by June 29.

"June 29 (when G8 foreign ministers are to meet in Moscow) is more or less a deadline," a senior European diplomat said.

A second diplomat, who like the first asked not to named due to the extreme sensitivity of the consultations, stressed that the timing remained flexible, as the goal was to get a positive response from Iran.

"If they ask for a little bit more time, I'm sure that we will give it to them," the diplomat said.

In Tehran, state television quoted President Mahmoud Ahmadinejad as calling for "a just and equal dialogue with no preconditions" and saying that a counter-offer was in the works.

"Our experts are examining the proposal. After the examination, ... Iran's views will be submitted to the other party," he said in a meeting with Iran's top officials and supreme leader Ayatollah Ali Khamenei.

US officials have accused Iran of trying to divide the United States and its partners, but Bush insisted: "We've all agreed on a unified approach to solve this problem diplomatically."

The summit is also likely to highlight European concerns over the US prison camp for terror suspects at Guantanamo Bay, Cuba, and the CIA's alleged secret transfer of prisoners through Europe.

Bush will fly on to Budapest on Thursday for ceremonies marking the 50th anniversary of the Hungarian uprising against Soviet-led communist rule.

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