Vienna, Austria - Senior negotiators for Iran and the European Union reported progress Saturday at talks meant to find common ground for resolving Tehran's defiance of a UN demand that the Islamic republic freeze uranium enrichment or risk sanctions.

Iran's top nuclear negotiator Ali Larijani talks to the press after the meeting with European Union foreign policy chief Javier Solana at the federal chancellery in Vienna, Saturday, September 9, 2006. Solana and Larijani met in Vienna in a crucial effort to kick-start negotiations hampered by Tehran's refusal to freeze uranium enrichment. [AP Photo]

In an encouraging sign, the two sides agreed to hold further discussions Sunday.

"We had some good and constructive talks and we have made some progress in some areas, and we shall continue ... tomorrow," chief Iranian nuclear negotiator Ali Larijani said, speaking through an interpreter.

Cristina Gallach, spokeswoman for Javier Solana, the EU's foreign policy chief, confirmed that more talks would be held Sunday. "The feedback from the table is that the talks have been constructive and positive," she said.

The discussions have been billed as possibly the last chance for Iran to avoid sanctions for rejecting the UN Security Council's demand that it suspend its uranium enrichment processes, which can be misused to make nuclear bombs.

Being held at the Austrian chancellor's office, the talks are looking for a basis to open negotiations between Iran and six world powers that have offered a package of economic and diplomatic incentives meant to persuade Tehran to limit its nuclear program.

The five permanent Security Council members, the United States, China, Britain, France and Russia, along with Germany have demanded that Iran halt enrichment as a condition for the talks, but the Iranians have steadfastly refused to do so.

With the two side seemingly so far apart, hopes for success had been slim for the mission by Solana, who is formally authorized by the six powers to carry their message and listen to the Iranians, without actually negotiating.

Still, positions appeared to have shifted slightly.

European officials who insisted on anonymity suggested that at least some of the six nations were at least ready to listen if Iran committed itself to an enrichment freeze soon after the start of negotiations instead of doing so as a condition for such talks.

The officials declined to provide details. But such a readiness would deal a blow to US-led attempts to hold fast to the demand that Iran freeze enrichment before any talks commence, or face the prospect of Security Council sanctions.

One of the officials said Solana discussed the issue with US Secretary of State Condoleezza Rice before going into the meeting but declined to offer details.

As late as Friday, US Undersecretary of State Nicholas Burns said Washington expected the Security Council to start discussing a draft on sanctions as early as next week unless Tehran reversed course and agreed to freeze enrichment.

But there might be opposition to that within the council. Russia and China have resisted a quick move to sanctions while agreeing to them as the ultimate punishment.

And French Foreign Minister Philippe Douste-Blazy on Thursday appeared to suggest the demand on freezing enrichment first and talking later was negotiable. "The question is to know at what moment this suspension takes place compared to negotiations," he said.

He later appeared to reverse himself, saying in separate comments that suspension "is an absolute prerequisite for restoring trust and resuming negotiations."

A European diplomat said the mixed signals seemed to reflect that a sizable number of countries within the 24-member EU oppose a quick move to sanctions, even though Britain, France and Germany formally represent the bloc within the six-nation negotiating group.

China, meanwhile, repeated on Saturday its stance that patience was needed in dealing with Iran.

During a meeting with EU leaders in Finland, Chinese Premier Wen Jiabao urged Tehran "to make constructive steps" toward ending the standoff, but added: "Our purpose is that the nuclear issue of Iran will be settled peacefully."

Burns had dismissed suggestions of cracks in the six-power coalition on when Iran should commit to enrichment Friday, a day after those six countries ended confidential discussions on Iran in Berlin.

Outlining the US view of the timetable on Iran, Burns said the six nations would consult further by phone Monday and hoped to present a unified approach on sanctions to their foreign ministers by the time the UN General Assembly opens Tuesday.

"The American view is that following these discussions on Monday and perhaps some others early next week, we should move this to the Security Council and draft a resolution" on sanctions, he said.

Iran says it wants to develop an enrichment program to produce fuel for nuclear reactors that generate electricity. But there are growing concerns it seeks enrichment technology to make weapons-grade uranium for the core of warheads.

The six powers agreed on a package of economic and political rewards in June to be offered to Tehran, but only if it stops enrichment before the start of negotiations aimed at a long-term enrichment moratorium.

But the international alliance also warned of punishments, including UN sanctions, if Tehran did not halt enrichment, something Iran refused to do by the Aug. 31 deadline set by the Security Council.