WASHINGTON, May 31: The US will hold direct -– but not bilateral -– talks with Iran on its nuclear programme once Tehran stops enriching uranium at its facilities, Secretary of State Condoleezza Rice said on Wednesday.

The talks can be held “as soon as Iran fully and verifiably suspends its enrichment and reprocessing activities,” said Ms Rice while announcing the initiative which is seen as a major diplomatic shift in America’s position on Iran. So far, Washington has been refusing to hold direct talks with the Islamic Republic which President Bush once described as part of an ‘axis of evil’.

“The United States will come to the table with our EU colleagues [France, Germany and Britain] and meet with Iran’s representative,” said Ms Rice in a prepared statement released by the State Department. The move aims to “underscore our commitment to a diplomatic solution and to enhance the prospects for success,” she added.

Earlier on Wednesday, the Swiss ambassador to the United States was called to the State Department and given a copy of the remarks to be sent to Iran. A copy was also sent to Iran’s ambassador to the United Nations in New York, a State Department official said.

Crude oil futures fell about $1.5 a barrel in New York trading following the US offer of talks to Iran, the world’s fourth-largest oil producer.

Escalating tensions over Iran’s nuclear programme and concerns that Iran may choose to retaliate by limiting crude supplies to the global market have been one of the key drivers of a steep rise in world oil prices.

In her statement, Ms Rice also spelled out the conditions the US wants met before holding multilateral talks with Iran. These include “immediately resuming suspension of all enrichment-related and reprocessing activities as well as full cooperation with the IAEA and returning to implementation of the Additional Protocol providing greater access for the IAEA.”

In the past the Bush administration had repeatedly dismissed calls from members of Congress, former officials and prominent analysts for dialogue with Tehran.

Earlier this month the US administration summarily dismissed an unprecedented letter from Iranian President Mahmoud Ahmadinejad, the first direct communication between an Iranian and US president in decades.

But on Wednesday Ms Rice expressed America’s desire to expand its relations with Iran, severed after Iranian militants seized the US Embassy in Tehran on Nov 4, 1979 and held hostage 52 diplomats and US citizens for 444 days.

President Bush wants a “positive relationship between the American people and the people of Iran,” she said, citing “increased contacts in education, cultural exchange, sports, travel, trade and investment”.

Ms Rice, who is likely to attend a conference of the five permanent members of the UN Security Council and Germany in Vienna on Iran on Thursday, said the US and its European partners also agreed “on the essential elements of a package containing both the benefits if Iran makes the right choice and the costs if it does not”.

Reports in the US media say that on Russia’s insistence the United States and its European allies have agreed to remove from the new draft of the proposed package the clause of using force against Iran to solve the nuclear dispute.