Six world powers sought common ground Wednesday on rewarding Iran if it gives up uranium enrichment or punishing it if it doesn't, as the U.N. chief urged Tehran to dispel fears it wanted nuclear arms.

The meeting ended with no formal word on the state of progress at the talks — which brought together officials from the five U.N. Security Council nations and Germany. But it went past its scheduled end into the early evening — a development one diplomat called "encouraging because it shows they had something to talk about."

CountryWatch: Iran

Among the issues being discussed was a compromise proposal for possible U.N. Security Council sanctions against Iran should Tehran refuse to give up uranium enrichment, diplomats said.

The compromise — which would drop the automatic threat of military action if Iran remains defiant — is part of a proposed basket of incentives meant to entice Iran to give up the enrichment process, a possible pathway to nuclear arms. It also spells out the penalties if it does not. It is meant to get support both from Russia and China, which oppose any suggestion of force in pressuring Iran.

France, Britain and Germany discussed the final form of the package Tuesday ahead of submission for hoped-for approval at Wednesday's formal meeting of the five permanent Security Council members — the United States, Britain, France, Russia and China — and Germany.

The venue of the meeting was officially kept secret, reflecting the delicate nature of the negotiations, but journalists saw representatives of five of the six countries leave the home of British Foreign Secretary Margaret Beckett.

If accepted, the compromise would resolve wrangling within the Security Council since it became actively involved in March, two months after Iran's nuclear file was referred to it by the 35-nation board of the International Atomic Energy Agency, the U.N.'s nuclear monitoring agency.

Russia and China have opposed calls by America, Britain and France for a resolution that would threaten sanctions and be enforceable by military action.

The compromise proposal is meant to break that deadlock, said the diplomats, who demanded anonymity in exchange for discussing the package with The Associated Press.

If Iran remains defiant, the proposal calls for a Security Council resolution imposing sanctions under Chapter VII, Article 41 of the U.N. Charter. But it avoids any reference to Article 42 — which is the trigger for possible military action to enforce any such resolution.

And in an additional reassurance to Moscow and Beijing, it specifically calls for new consultations among the five permanent Security Council members on any further steps against Iran. That is meant to dispel past complaints by the Russians and Chinese that once the screws on Iran are tightened, it would automatically start a process leading to military involvement.

In Hanoi, Vietnam, U.N. chief Kofi Annan urged Tehran to examine any offer in good faith, saying: "In my contacts with the Iranians, I have appealed to them not to reject anything out of hand." And he urged Iran "to lift the cloud of uncertainty surrounding its nuclear project, whether it is seeking nuclear weapons or if it's only peaceful."

Still, Iran again appeared to rule out any compromise on its right to enrichment.

"Use of nuclear energy is a right the Iranian nation is demanding every day and standing by it," Iranian President Mahmoud Ahmadinejad told thousands of people in Khorramshahr in southwestern Iran.

It was unclear whether the changes to the language of the proposed resolution would be enough to satisfy Russia and China because any such resolution would still declare Iran a threat to international peace — something also opposed by Moscow and Beijing. Russia and China also have until recently spoken out against possible sanctions on Tehran, their economic and strategic partner.

The draft European proposal, shared in part with The Associated Press, listed among possible sanctions banning travel visas for government officials; freezing assets; banning financial transactions of key government figures and those involved in Iran's nuclear program; an arms embargo, and an embargo on shipping refined oil products to Iran. While Iran is a major exporter of crude it has a shortage of gasoline and other oil derivatives.

If Tehran agrees to suspend enrichment, enter new negotiations on its nuclear program and lift a ban on intrusive inspections by the IAEA, they would be offered rewards including agreement by the international community to "suspend discussion of Iran's file at the Security Council."

The package also promised help in "the building of new light-water reactors in Iran," offered an assured supply of nuclear fuel for up to five years, and asked Tehran to accept a plan that would move its enrichment program to Russia.