The stand-off over the disputed Iranian nuclear program cannot be resolved without the engagement of Iran''s Arab neighbors, U.N. atomic watchdog chief Mohamed ElBaradei said on Monday.

He said a U.S. policy turnabout toward direct talks with Iran has boosted chances of a peaceful solution but the involvement of Arab states was crucial. Arabs have historically mistrusted Iran but are split over how to deal with it.

"I find it surprising that the Arab countries are not engaged in dialogue between Iran and the West. The neighbors so far have been sitting on the fence. Any solution to the Iranian issue has to engage the neighbors," ElBaradei said.

Middle East analysts say Gulf Arab states had little love for ex-U.S. President George W. Bush''s hawkish, no-negotiations stance on Iran, fearing it could lead to a ruinous regional war.

But now they worry that any U.S. rapprochement with Iran could ultimately produce a nuclear-armed, non-Arab, Shi''ite Muslim superpower in their back yard and squeeze Sunni Muslim Arabs between two non-Arab nuclear power hubs, Iran and Israel.

Any collective Arab action on Iran, however, appears mired in chronic divisions over other issues including a 2002 Saudi-sponsored peace offer to Israel, opposed by some hardline or militant Arabs backed by Iran.

ElBaradei also said a Middle East security structure drawing in Iran, all Arabs and Israel, believed to have the region''s only nuclear arsenal, would be an indispensable part of any Middle East peace arrangement.

A lack of security guarantees, he said, lay at the heart of Iran''s motivation to pursue what would be virtual nuclear weapons status, since uranium enrichment can be used either for electricity generation or for material to detonate atom bombs.