Iran offers energy cooperation at Asia summit

SHANGHAI, June 15 (Reuters) Iranian President Mahmoud Ahmadinejad today offered energy cooperation to oil-thirsty China and other countries, seeking to win friends but avoiding direct mention of Iran's nuclear standoff with the West.

Ahmadinejad attended a summit of the Shanghai Cooperation Organisation (SCO) as an observer, but his presence threatened to upstage the meeting and rile the United States.

''We want this organisation to develop into a powerful body influential in regional and international politics, economics and trade, serving to block threats and unlawful strong-arm interference from various countries,'' he said in a speech.

Ahmadinejad spoke after leaders of the group's six members China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan addressed the one-day summit in China's financial capital, focused on cooperation in security, finance and fighting drugs.

He added that Iran, the world's fourth-largest oil producer, was ready to host a meeting of energy ministers from member countries to look at cooperation in exploration, exploitation and transportation.

Iran is China's third-biggest supplier of crude oil imports.

The organisation was born out of the ''Shanghai Five'', which was founded in 1996 to demilitarise the border between China and the former Soviet Union.

China now sees it as a way to protect development in the largely Muslim region to its west, arguing that it serves as a bulwark against terrorist activities and religious extremism.

But US officials have suggested China and Russia want to use the group to counter Washington's influence in Central Asia, where the US military has bases or access to facilities.

There were no direct references to frictions with Washington. But a declaration issued by member countries said they would not ''allow their territories to be used to undermine the sovereignty, security or territorial integrity of other member states''.

NUCLEAR TENSIONS Iran's inclusion in the group albeit as an observer along with India, Pakistan and Mongolia has irked the United States, whose Defense Secretary Donald Rumsfeld has called Tehran the world's leading terrorist nation.

Iran is considering a package of incentives and penalties the five permanent members of the UN Security Council and Germany put forward to persuade it to abandon uranium enrichment.

Tehran says it has a right to a civilian nuclear programme, and denies US accusations it is trying to build an atomic bomb.

Russian President Vladimir Putin said in bilateral talks with Ahmadinejad he agreed with Iran that all countries were entitled to peaceful use of nuclear energy, Russia's RIA news agency said.

But Putin added that nuclear technology must be used in such a way that it adheres to the international community's concerns, the report said.

If Iran rejects the package, Western powers may push for UN-backed sanctions, a step China and Russia have resisted.

Iranian Foreign Minister Manouchehr Mottaki and his Chinese counterpart Li Zhaoxing discussed the nuclear dispute on Thursday in Shanghai, a Chinese foreign ministry spokesman told reporters.

''Li made vigorous efforts to see negotiations resume as soon as possible,'' spokesman Liu Jianchao said.

''I think that Iran may need extra time,'' Liu added, but he declined to specify how long. He also said China would consider Iran's energy offer but left any decision to the future.

China's President Hu is to hold talks with Ahmadinejad tomorrow, and the Iranian leader will then hold a news conference.

Some in the United States and Europe are starting to worry as much about the timing of Iran's reply as its content. In Washington, a Western diplomat said the main concern was that Iran would string out a response until an International Atomic Energy Agency meeting in September.

During this time it could edge closer to mastering the ability to enrich nuclear fuel.

''You can't put the toothpaste back in the tube after it's out,'' said the diplomat.

REUTERS SY ND2050