Jung, a member of Chancellor Angela Merkel's conservative Christian Democrats, said he understood U.S. reservations but added that a ban on Iranian enrichment work was unrealistic.

"One cannot forbid Iran from doing what other countries in the world are doing in accordance with international law. The key point is whether a step toward nuclear weapons is taken. This cannot happen," he said.

"REALISTIC WAY FORWARD"

Although all six countries that back the incentives offer would prefer that Iran suspend its enrichment program, there is growing concern that the deadlock over whether Iran should be allowed keep its enrichment program could prevent negotiations with Iran from ever taking place, diplomats in Vienna have said.

The IAEA diplomat said Jung's comments were a nice surprise.

"If this position is not retracted or undermined by accusations of going-it-alone, then it's real news," the diplomat said. "If we all want a negotiated solution, this is the only realistic, sensible and reasonable way forward."

Tehran has yet to respond to the offer and the United States and Germany have called for an answer by the G8 summit in July.