Leaders of eight Muslim-majority nations signed agreements aimed at lowering trade barriers and boosting economic cooperation on Saturday, at a summit overshadowed by fears about Tehran's nuclear programme.

(L to R) Turkey's Prime Minister Tayyip Erdogan, Pakistan's Prime Minister Shaukat Aziz, Iran's President Mahmoud Ahmadinejad and Indonesia's President Susilo Bambang Yudhoyono talk during the Developing Eight (D-8) Summit at the Bali Convention Centre on the Indonesian island of Bali May 13, 2006. The D-8 groups some of the world's most populous Muslim-majority nations and is aimed primarily at developing economic and trade ties. [Reuters]

The Developing Eight (D-8), holding its fifth summit since its founding in 1997, groups some of the world's most populous Muslim-majority nations and is aimed primarily at raising living standards of its members' more than half a billion people.

But focus on those goals has been diverted by worries that nuclear projects in Iran that may have military aims. Iran, the D-8's outgoing chairman, says the projects are for peaceful purposes.

The D-8 has touched on nuclear energy in discussions of cooperation on developing alternate sources of power, but has thus far not directly addressed the dispute over Iran.

The United States wants to curb programmes it fears could lead to atomic weapons and has asked the U.N. Security Council to pressure Iran.

Adding to concerns, U.N. inspectors have found traces of near bomb-grade enriched uranium on nuclear equipment in Iran, diplomats said on Friday, as the EU prepared a declaration that will insist Tehran shelve all enrichment work.

Iranian President Mahmoud Ahmadinejad did not mention the dispute in his opening remarks at the conference. Iran is the outgoing chairman of the group.

He urged more effort by members to increase their ties and further development "in the service of international peace and society".

"We can offer a good model for peace and justice," he said of the D-8, which in addition to Indonesia and Iran includes Bangladesh, Egypt, Turkey, nuclear-armed Pakistan, Nigeria and Malaysia.

The latter two include substantial numbers of non-Muslims although Ahmadinejad, considered a hard-line Islamist, referred to the group as part of the "Muslim ummah (community)".

Indonesia President Susilo Bambang Yudhoyono, a Muslim moderate, delivered the other opening speech. Indonesia is the incoming chair of the D-8.

Yudhoyono pointed out the meeting was being held on an island with a Hindu majority, underscoring the group's "commitment to promote tolerance as a bedrock of world peace".

He also praised the resilience of the Balinese in dealing with the aftermath of "devastating terrorist attacks".

Blasts at Bali tourist spots in 2002 and 2005 killed more than 220 people and were blamed on a militant Islamic group with links to al Qaeda.

Ahmadinejad was scheduled to speak again on Saturday at an evening news conference.

The United States has pushed for a Security Council resolution on Iran's nuclear programme. That step is now on hold while European Union officials shape a "carrots and sticks" offer to Tehran on the issue.

The package of incentives will insist Iran shelve uranium enrichment work, according to an EU draft leaked on Friday, even though Tehran has ruled this out in advance.

in a visit to Jakarta before coming to the summit, Ahmadinejad called Western pressure "psychological propaganda".

The United States and its allies suspect Iran's professed ambition to purify uranium to generate electricity is a smokescreen, a concern stoked by Tehran's 18-year concealment of sensitive enrichment research.

But Russia and China have resisted any U.N. Security Council resolution that could spawn sanctions.