TEHRAN, Iran - Iran said Sunday that it will offer a "multifaceted response" Tuesday to a Western package of incentives aimed at persuading Tehran to rein in its nuclear program, but insisted it won't suspend uranium enrichment altogether.

A TV grab taken from Iran's state television shows the new short-range missile called Saegheh or lightning in Farsi test-fired during the second day of the military manoeuvers at Sistan-Baluchestan province, east of city of Zahedan near the Pakistani border. The surface-to-surface missile has a range of between 80 and 250 kilometers (50 and 155 miles).[AFP]

Speaking after Iran's military test-fired 10 short-range missiles, Foreign Ministry spokesman Hamid Reza Asefi said at a news conference that a nuclear compromise would have to be reached during future negotiations.

"Everything has to come out of negotiations," Asefi said. "Suspension is not on our agenda."

The U.N. Security Council passed a resolution last month calling for Iran to suspend uranium enrichment by Aug. 31 or face the threat of economic and diplomatic sanctions.

"We have made clear that if Iran fails to comply with the Security Council's mandate, we will move quickly at the United Nations to impose sanctions," White House spokeswoman Emily Lawrimore said Sunday.

U.N. Secretary-General Kofi Annan said he expected Tehran's response to the incentives package to be positive.

"In a time of acute crisis in the Middle East, I believe that progress on the nuclear issue is essential for the stability not only of the region, but the international system itself. It is time to take steps in the right direction," he said in a statement.

Uranium enrichment produces reactor fuel, but it also can make fissile material for nuclear warheads, and the United States and other countries suspect Iran is trying to develop atomic weapons.

Iran, which claims it only wants reactors to generate electricity, has rejected the resolution as "illegal," saying it has not violated any of its obligations under the Nuclear Non-Proliferation Treaty.

Asefi said the world could not afford to join the United States in imposing sanctions.

"Iran's influence in the region is clear. A country like Iran has extensive political, economic and cultural capabilities. Will other countries ignore Iran's capabilities in their political and economic cooperation?" he said.

The incentives package, aimed at persuading Iran to suspend uranium enrichment, includes promises that the United States and Europe will provide civilian nuclear technology and that Washington will join direct talks with Iran.

Iran has said the package is an "acceptable basis" for a compromise. Asefi said part of the package was "convincing" but there were ambiguities that needed to be clarified in talks.

Earlier, Iran's state-run television reported the test-firing of 10 surface-to-surface Saegheh missiles Sunday, a day after large-scale military exercises began across the country.

The military exercises come as Iran faces heightened international scrutiny for its support of the Shiite Muslim militants of Hezbollah in Lebanon.

The White House condemned Iran's "show of military force" and said it "serves to remind us of the dangers of its nuclear ambitions."

"Iran sits at the nexus of weapons of mass destruction and terrorism," Lawrimore said. "We know that Iran is producing and developing delivery systems that could threaten our friends and allies in the Middle East and Europe and eventually the United States itself."

The Saegheh has a range of 50-150 miles, state TV said. It did not specify whether the missile is capable of carrying a nuclear warhead, but it isn't believed to be.

Iran already has the Shahab-3 missile, which is capable of carrying a nuclear warhead. An upgraded version of the ballistic missile has a range of more than 1,200 miles and can reach Israel and U.S. forces in the Middle East.

Last year, former Defense Minister Ali Shamkhani said Tehran had successfully tested a solid fuel motor for the Shahab-3, a technological breakthrough for the country's military.

Iran's military test-fired a series of missiles during large-scale war games in the Persian Gulf in March and April, including a missile it claimed was not detectable by radar that can use multiple warheads to hit several targets simultaneously.