By Fredrik Dahl and Parisa Hafezi
The five permanent U.N. Security Council members — the United States, Russia, China, France and Britain — and Germany are expected to discuss sweetening an incentives package offered in 2006 when their officials meet in Shanghai on Wednesday.
Iranian officials have repeatedly ruled out halting the nuclear programme in return for trade and other benefits.
"I don't think it is a bargain Iran will accept," one Iranian analyst who spoke on condition of anonymity said. "The enrichment programme is the red line at the moment."
President Mahmoud Ahmadinejad last week further defied U.N. demands by announcing the start of a major expansion of Iran's uranium enrichment capacity. Refined uranium can be used as fuel for power plants and also provide material for weapons.
But Foreign Minister Manouchehr Mottaki said on Sunday that Iran would soon unveil proposals with "a new orientation" to help end international and other problems. He gave no details.
Iran, the world's fourth-largest crude producer, says it plans to build a network of nuclear power plants to meet soaring electricity demand and help it export more of its oil and gas.
It has been hit by three rounds of limited U.N. sanctions over its refusal to stop enrichment, but analysts say its oil wealth is helping it to cushion the impact.
The incentives offered to Iran two years ago included civil nuclear cooperation and wider trade in civil aircraft, energy, high technology and agriculture.
"BACK CHANNEL" TALKS?
China and Russia are now pushing for greater incentives, but one European diplomat said he expected no major changes.
"I don't think there's any particular desire to significantly rewrite the package," he said. "We feel that Iran really hasn't taken a close enough look at what is an extremely generous package."
A senior Iranian official told Reuters he expected incentives that were a "bit stronger" from world powers, especially concerning power plants and nuclear fuel supply. "It will be a basis for further talks," he said without elaborating.
He declined to comment on Mottaki's remarks about drawing up new ideas. The EU diplomat said: "We'll need to see what Mottaki means before we can judge."
British daily The Independent this week said Iran and the United States have been engaged in secret "back channel" discussions for the past five years on Tehran's nuclear programme and broader relations between the two old foes, a charge denied by the U.S.
"The lines of communication with Iran are through established, clear channels," White House spokesman Gordon Johndroe, said.
Diplomatic ties between the United States and Iran have been frozen for almost three decades, but the two have had direct discussions about security in Iraq security. Talks on the nuclear issue have been largely through the United Nations.
Ex-senior U.S. diplomat Thomas Pickering said a group of former American diplomats and experts had been meeting with Iranian academics and policy advisers "in a lot of different places, although not in the U.S. or Iran."
Pickering is advocating a compromise proposal under which an international consortium would run enrichment on Iranian soil to ensure the nuclear fuel is not diverted for military purposes. Iran has said it was open to such a consortium on its territory.
Senior researcher Shannon Kile of the Stockholm International Peace Research Institute (SIPRI) told Reuters it had helped facilitate the talks but declined to give details.
(Additional reporting by Edmund Blair in Tehran and Mark Heinrich in Vienna; Writing by Fredrik Dahl; Editing by Matthew Jones)
