Ayatollah Ali Khamenei, the Supreme Leader of Iran, today backed a tentative proposal to hold formal talks with the America over the future of Iraq.

In a speech broadcast on state television, the Ayatollah insisted that the Islamic Republic would not bow to any demands from Washington but hoped to engage in useful negotiations to help stabilise its war-ravaged neighbour.

Both America and Iran have emphasised that the talks will focus solely on Iraq and will not touch on the inflammatory issue of Iran's determination to enrich uranium. Analysts have said that the two are inextricably linked.

Simon Bailey, from the London-based Gulf Intelligence Monitor, said: "This is a quintessential example of the old Chinese proverb, ‘one bed, two dreams’, with the Americans dreaming of a pacified Iraq and the Iranians dreaming of making their nukes without being bombed."

No time or place has yet been set for negotiations. Zalmay Khalilzad, the American ambassador to Iraq, has proposed holding a first meeting in Baghdad.

The Ayatollah's intervention today is being seen as his attempt to ease domestic criticism from hardliners who last week accused the regime of bowing to the 'Great Satan' by opening the way to negotiations. He said that Iran could "make the US understand some issues about Iraq".

In the speech, given from the holy Shia city of Mashhad in northeastern Iran, he added: "But if the talks mean opening a venue for bullying and imposition by the deceitful party [America], then it will be forbidden."

The announcement came several hours after President Bush said that he would be happy for his officials to show Iran "what’s right or wrong in their activities inside of Iraq".

The British and American administrations have accused Iran’s elite Revolutionary Guard of smuggling bomb-making technology and techniques across the Iraqi border to fuel the insurgency. The White House accepted last week that it had no evidence Iran’s government is sponsoring such activity.

President Bush nevertheless told reporters that he had instructed Mr Khalilzad to make Iran understand that "attempts to spread sectarian violence are... not acceptable to the United States".

The joint declaration follows weeks of behind-the-scenes discussions between the powers, which were ongoing even as politicians on both sides intensified the rhetoric of their public confrontation. The two have shunned high-level contact but there have been ongoing talks between officials on such issues as Afghanistan and drug trafficking.

Some among Iran's elite are thought to be losing patience with President Ahmadinejad's anti-Western bombast, which they are concerned is tipping the country into isolation and crisis.

Manouchehr Mottaki, the Iranian Foreign Minister, said that Iran's intervention could help Iraq to break the deadlock over the formation of a government. Ali Larijani, the secretary of the Supreme National Security Council - who is also heading the nuclear negotiations - said Iran hopes the meetings will expedite the withdrawal of US troops.

Iran has considerable influence with the Shia political parties who dominate Iraq’s new parliament: most of Iraq's senior Shia figures lived in exile in Iran during the latter years of Saddam Hussein's rule. Condoleezza Rice, the US Secretary of State, has conceded that US-Iranian talks on Iraq could be "useful".

* The UN Security Council today put off a scheduled meeting to set a deadline for Iran to comply with demands to suspend its nuclear research. Britain and France have requested more time to address Russia's concerns over the possible implementation of sanctions.

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