Iran on Wednesday cited "positive and clear signals" in its proposal to resolve the standoff over its nuclear program, and China and Russia signaled support for a negotiated deal. But the U.S. and France said Tehran's offer falls short, setting the stage for a possible fight at the U.N. if the West pushes for sanctions.

Diplomats from Europe, the U.S., Russia and China were studying the details of Iran's offer a day after Tehran presented it Tuesday without any detailed public comment. Iran's proposal offers negotiations on its nuclear program but apparently resists suspending uranium enrichment — the key U.N. Security Council demand to avoid sanctions.

A statement by the State Department acknowledged that Iran considered its proposal to be a serious one and "we will review it." But it went on to say that Iran's response "falls short of the conditions set by the Security Council." (Full story)

CountryWatch: Iran

Neverthless, the Iranians sought Wednesday to portray their detailed counteroffer as a major initiative which could lead to resolution of the yearlong dispute without having to resort to a bruising fight over sanctions.

It appeared the counteroffer was designed to entice European countries, China and Russia into further negotiations without accepting a suspension of uranium enrichment — a key step make nuclear weapons — as a precondition for talks.

That could drive a wedge between the Americans, British and French on one side and the Russians and Chinese on the other. Last month, Russia said the Security Council was in no rush to pressure Iran, striking a more conciliatory tone than the United States.

"If the Europeans pay proper attention to positive and clear signals included in Iran's response, the case will be solved through negotiation and without tension," state-controlled radio quoted Foreign Ministry spokesman Hamid Reza Asefi as saying on Wednesday.

Asefi described Iran's response as a sign of his country's good will to resolve the standoff.

The dispute over Tehran's nuclear program revolves around Iran's insistence that it wants to master the technology simply to generate electricity. But critics say Iran is interested in enrichment because it wants to make nuclear weapons.

French Foreign Minister Philippe Douste-Blazy said "the door is still open" for negotiations but only if Iran suspends uranium enrichment first. German Foreign Ministry spokesman Martin Jaeger said the demand to halt enrichment was due to the fact "that Iran clearly has lost the confidence of the international community that its nuclear program is civilian."

But Russia and China — both veto-wielding members of the Security Council — appeared receptive toward further talks. Russia's Foreign Ministry said it would continue to seek a negotiated solution, and China appealed for dialogue, urging "constructive measures" by Iran and patience from the U.S. and its allies.

Russian Foreign Ministry spokesman Mikhail Kamynin said talk of sanctions was "premature" before the Aug. 31 deadline set by the Security Council for Iran to halt uranium enrichment or face the risk of economic and political sanctions.

"The Russian side has started studying the Iranian reply along with its partners in the sextet," Kamynin said in a statement. "Russia will continue with its course of searching for a political solution ... and will continue to seek to preserve the role of the International Atomic Energy Agency and prevent the erosion of the nonproliferation regime."

Last month, a senior Iranian lawmaker said parliament was preparing to debate withdrawal from the Nuclear Nonproliferation Treaty if the Security Council adopts a resolution to force Tehran to suspend enrichment.

Iran delivered the written proposal in response to a package of incentives offered in June by the five permanent Security Council members and Germany to persuade Iran to halt enrichment — and the threat of punishments if it does not.

Last month, the Security Council set the Aug. 31 deadline for Iran to halt enrichment or face economic and political sanctions. Iran called the resolution "illegal" but had said it was willing to offer a "multifaceted response" to the incentives package.

The Western incentives package has not been made public but some details have leaked. They include an offer to lift a ban on sales of Boeing passenger aircraft as well as providing Iran with some nuclear technology to build reactors for peaceful purposes.

The current drama is playing out amid fears that the ability of the pro-Iranian Hezbollah guerrillas in Lebanon to withstand 34 days of Israeli bombardment has emboldened hard-liners in Tehran to risk a showdown with the Americans.

There has also been speculation in the West that Iran encouraged Hezbollah to provoke the Israelis to distract attention from its nuclear ambitions.

In London, a leading British think-tank said Iran has established itself as Washington's chief rival in the Middle East and now wields more influence than the Americans in Iraq.

The report by Chatham House said that the ease with which Iran now operates in the Middle East has "severely compromised" America's ability to confront Iran.

"While the U.S. has been playing poker in the region, Iran has been playing chess," said Nadim Shehadi, a report contributor. "Iran is playing a longer, more clever game and has been far more successful at winning hearts and minds."

The Iranians have signaled strongly for weeks that they are not prepared to abandon enrichment as a precondition to talks. In February, Iran for the first time produced its first batch of low-enriched uranium, using a cascade of 164 centrifuges.

In recent weeks, Iran has prevented U.N. nuclear agency inspectors from inspecting an underground site meant to shelter its enrichment program from attack, diplomats said Monday.