Iran nuclear row looms over Bali D-8 nations' summit

Indonesia, May 13 (Reuters) The presidents of Iran and Indonesia began a summit of eight developing nations yesterday overshadowed by fears about Tehran's nuclear programme.

The Developing Eight (D-8) groups some of the world's most populous Muslim-majority nations and is aimed primarily at developing economic and trade ties.

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

The United States has vowed to curb the 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 touch on the dispute in his opening remarks at the summit on the resort island of Bali, although nuclear energy is one of the topics the leaders will discuss later in the day.

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, 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 terrorist attacks. Blasts in 2002 and 2005 killed more than 220 people and were blamed on a militant Islamic group with links to al Qaeda.

The leaders were also scheduled to hold talks on reducing trade barriers and alternative energy, including nuclear power, ahead of news conferences by the group as a whole and Iran individually. 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.

President Ahmadinejad on Friday, in a visit to Jakarta before coming to the summit, 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.