China is for the first time hosting talks on Iran's nuclear programs. As Daniel Schearf reports from Shanghai, China wants to show it is a responsible power while balancing its need for oil from Iran.

Political director of Germany's Foreign Ministry Volker Stanzel, far left, talks with another delegate at a six nation political directors' meeting on Iran's nuclear program in Shanghai, China, 16 Apr 2008

The meeting Wednesday in Shanghai brings together the five permanent members of the United Nations Security Council plus Germany and the European Union. The delegates will discuss increasing incentives for Iran to stop enriching uranium and to cooperate fully with the U.N.'s International Atomic Energy Agency.

The United States, France, Britain, Germany and the EU are concerned Iran wants to use enriched uranium to build nuclear weapons and have been pushing for stronger sanctions against Tehran.

Iran denies the allegations and rejects the U.N. demands despite three rounds of limited sanctions.

Russia and China, both permanent Security Council members, do a lot of business with Iran and have been reluctant to support tougher sanctions.

Shen Dingli is an expert on nuclear politics at Shanghai's Fudan University. He says China is in a delicate balancing act, trying to please both sides in the dispute.

Shen Dingli

"We have to care [about] Iran's legitimate right for civilian nuclear energy and Western countries legitimate demand for Iran to clarify its nuclear past. So, China is caught," he said. "We need to do both, but this might not reconcile."

Iran is China's third largest source of imported oil.

Shen says Beijing will not likely support tougher sanctions unless more evidence emerges of a nuclear weapons program.

International pressure against Iran eased somewhat when a U.S. intelligence report said Iran had halted plans on developing nuclear weapons several years ago.

Shen says a breakthrough at the Shanghai talks is not likely. Iran has refused offers of economic, diplomatic, and security incentives as well as cooperation on civilian nuclear power. But, in a possible sign of flexibility, Iranian officials this week said compensation for economic damage caused by the sanctions should be a part of the negotiations.

Iran's Foreign Minister also said Tehran would soon offer a proposal to resolve the dispute.  He gave no details but said any agreement would have to respect Iran's rights and not limit them, an apparent reference to its nuclear programs.