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Thu 26 Jun 2008 10:25 AM

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Diplomacy key to Iran nuclear row - US

Iran nuclear issue can be solved in diplomatic process with US allies, including Israel, says Bush.

US President George W. Bush believes the Iran nuclear issue can be solved diplomatically in a process involving allies including Israel, the White House said on Wednesday.

The US position was set out after The New York Times reported last week Israel had practised a possible military strike against Iran.

The European Union's top diplomat also stressed the diplomatic track, saying Western powers would continue a twin policy of sanctions and diplomacy towards Iran over its nuclear programme, despite Tehran's warnings it could backfire.

Asked whether Israeli officials were pressuring the US administration to take military action against Iran before Bush leaves office, White House spokeswoman Dana Perino said the US and its allies, including Israel, wanted a diplomatic solution.

"President Bush believes that we can solve this issue diplomatically, and that everyone's preference is to solve it diplomatically, not just here in the US but with our allies and certainly with Israel," Perino said.

The dispute between the West and Tehran over Iran's atomic programme has sparked fears of a military confrontation that would disrupt vital oil supplies.

The New York Times on Friday quoted US officials as saying Israel had carried out a big military exercise in an apparent rehearsal for a potential strike at Iran's nuclear sites.

Israel, widely believed to have the Middle East's only atomic arsenal, has described Iran's nuclear programme as a threat to its existence.

Britain told Iran it would suffer growing economic and political isolation if it makes the "wrong choice" and fails to comply with UN demands on curbing sensitive atomic activities.

But Tehran remained defiant in the long-running standoff over nuclear work it says is designed to generate electricity but which the West fears is aimed at making bombs.

Its deputy foreign minister was quoted as saying the world's fourth-largest oil producer would withdraw assets from Europe in the face of tightening sanctions against the country.

Another senior official, parliamentary speaker Ali Larijani, warned the West against "provoking" the Islamic Republic.

Tehran said on Tuesday that new punitive measures imposed on it this week by the 27-nation European Union over its nuclear plans could damage diplomatic efforts to resolve the dispute.

EU foreign policy chief Javier Solana handed Iran an offer on June 14 of trade and other benefits proposed by the US, Russia, China, Britain, Germany and France in a new bid to end a row that has helped push oil prices to record highs.

Solana told newswire Reuters on Wednesday Iran had still not replied to the incentives offer aimed at coaxing it into halting uranium enrichment, which can have both civilian and military uses, but hoped for an answer soon.

Energy experts are concerned any conflict in Iran could lead to a shutdown of the Strait of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40 percent of the world's traded oil is shipped. (Reuters)