After talks with Iran in the Austrian capital Vienna, the EU said five areas of possible co-operation had been identified - in the fields of energy, drugs control, the environment, agriculture and care for refugees.

The leader of the EU delegation, Dr Albert Rohan, said the dialogue was designed to strengthen the hand of the moderates led by President Khatami.

Iran 'not an outcast'

He said that whilst their was "no guarantee that their line will win out at the end of the day" the EU could at least offer its assistance towards improving the battered Iranian economy as a key way of helping to bolster Mr Khatami's moderate cause.

The important thing, he said, was to show Iran that it was not an outcast in the international community.

Dr Rohan said there had also been lengthy discussion of the human rights situation in Iran and the recent disappearances and deaths of five writers and opposition figures.

EU officials say they have the impression that the killings were nothing to do with Mr Khatami's government, which is keen to find the perpetrators.

BBC regional analyst Pam O'Toole says it is thought that dogmatic religious circles who oppose the President's policies could be behind the violence.