Iranian officials ruled out any freeze in uranium enrichment on Saturday at the start of talks over Tehran's nuclear program attended for the first time by a senior U.S. diplomat.

"Any kind of suspension or freeze is out of the question," an Iranian official told Reuters, rejecting the main condition set by the United States and other major powers for formal negotiations to end the long-running dispute.

The high-level U.S. participation in the one-day meeting in Geneva, together with Iranian comments playing down the likelihood of an attack by the United States and Israel, had raised hopes of progress and helped ease record oil prices.

But the optimism was tempered by U.S. insistence that despite the presence of its envoy William Burns, real negotiations cannot begin until Iran has frozen sensitive nuclear work, a step Tehran has repeatedly ruled out.

"That remains the U.S. position and it will continue to be the U.S. position," U.S. Secretary of State Condoleezza Rice told a news conference in Washington.

Iran's ambassador to Switzerland said Iran would not accept freezing enrichment. "It is not in Iran's agenda to discuss this issue," Keyvan Imani told reporters.

"As our supreme leader (Ayatollah Ali Khamenei) clearly said, our path is very clear: We are not going to abandon our rights."

Khamenei said on Wednesday Iran was ready to negotiate, but showed no sign of backing down on the Islamic Republic's refusal to halt atomic activities.

HOPES DAMPENED

The Iranian comments dampened hopes which had been raised by upbeat statements ahead of the talks, which Iranian Foreign Minister Manouchehr Mottaki portrayed as "positive and constructive".

"Today's meeting might continue with several others so that the viewpoints of all sides can be put on the table so that we reach ... agreement," he told reporters.

He did not elaborate what he meant by agreement, but added that he hoped the talks would pave the way for agreeing on "a modality and a framework" for further negotiations.

Iran's chief nuclear negotiator Saeed Jalili also spoke of his "positive intentions" as he arrived in Geneva on Friday for the talks with officials from the United States, Russia, China, France, Britain and Germany - the so-called sextet.

Neither Jalili, Burns nor EU foreign policy chief Javier Solana spoke to reporters as they went into the first session of talks on Saturday.

Iran, the world's fourth-largest oil producer, rejects suspicions that it wants the atom bomb, saying the aim of the nuclear programme is to generate electricity so that it can export more oil and gas.

Western diplomats say they want the talks to clarify Iran's response to an offer, delivered last month, of technical and commercial incentives to suspend uranium enrichment.

Asked about the Iranian officials' rejection of suspension, Solana's spokeswoman Cristina Gallach said: "We have to wait to this afternoon to see the Iranian position. We are ready to look at creative manners to allow negotiations to start in full agreement with the U.N. Security Council."

The U.N. has imposed three sets of sanctions on Iran in a stand-off that goes back to the revelation in 2002 by an exiled opposition group of the existence of a uranium enrichment facility and heavy water plant in the country.

Tension has intensified since Tehran tested missiles last week, alarming Israel and unsettling energy markets on fears that conflict could disrupt supply.

Yet oil prices slipped on Friday, ending 13 percent down from last week's record of over $147 a barrel of crude.

Traders cited as factors the attendance of Burns - a career diplomat who helped restore U.S. ties with Libya in 2006 - and a comment by Mottaki that the chances of an Israeli or U.S. strike were "almost zero".