ASTANA (AFP) — The Bush administration is still considering setting up a diplomatic mission in Iran to improve contacts between the Iranian and American peoples, US Secretary of State Condoleezza Rice said Sunday.

Rice poured cold water on a news report that the administration had decided to hand the issue to its successor to avoid sending a negative signal while Iran pursued sensitive nuclear work in defiance of the international community.

"We continue to look at the idea," Rice told reporters who asked about a report that plans for opening a US interests section in Iran had been shelved.

"I think it's an interesting idea, but we're going to take a look at it in the light of what it can do for our relationship with the Iranian people," she said on a flight from India to Kazakhstan for talks on separate matters.

When asked again if there is still a chance such an interests section could be set up before President George W. Bush leaves office in January, Rice replied: "We're still looking at the idea."

US officials stress that a US interests section had always been considered in the context of improving contacts between the American and Iranian people rather that between the two governments.

Such a mission would not mark a move to restore diplomatic relations.

Similarly, Rice reminded journalists in July that the presence of the US interests section in Cuba did not indicate a thaw in relations between the United States and the communist island nation.

"We are always looking for ways to relate to the Iranian people to make it easier for them to relate to us, but we're still having that set of discussions," Rice told reporters at the time.

US-Iranian diplomatic ties were severed in the wake of the Iranian revolution in 1979 and the hostage taking of US diplomats.

With China, Russia, France, Britain and Germany, the United States has spearheaded the imposition of three sets of UN Security Council sanctions on Iran for its refusal to suspend the enrichment of uranium.

Washington and western allies suspect the activities are a cover for a nuclear bomb making program, but Iran denies the charge, saying the program is for peaceful nuclear energy.

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