U.S. President George W. Bush's administration has shelved plans to set up a diplomatic outpost in Iran, in part over fears it could affect the U.S. presidential race or be interpreted as political meddling, The Associated Press reported Saturday.

The proposal to send U.S. diplomats to Tehran for the first time in three decades attracted great attention when it was floated seriously at midyear but has been placed on indefinite hold as November's election nears and Iran continues to defy demands to halt suspect nuclear activities, officials said.

Two administration officials familiar with the matter spoke on condition of anonymity to discuss internal administration deliberations on the sensitive subject. The officials said it had been decided to leave the decision to the next U.S. president because it could be seen as a reward for Iran's nuclear intransigence, especially when Iranian policy has become a major part of the heated campaign between Democrat Barack Obama and Republican John McCain.

Obama has called for unconditional direct talks with the leaders of potential U.S. foes like Iran and North Korea, assuming that groundwork laid by lower-level officials indicated that the top-level talks would be fruitful.

McCain has ridiculed the suggestion as naive and dangerous.

Thus, opening an interest section, or de facto embassy, in Tehran could be interpreted as a Republican president helping a Republican nominee by neutralizing a distinction that might make the Democrat appealing. Or, it could be seen as hurting McCain by leaving him to defend a more hard-line position than the current Republican president.

Either way, the administration concluded that now was not the time.

"There is no desire to inject this into the campaign," the second official said.

The idea's demise represents the end of any marquee efforts to remake the U.S. relationship with its most formidable Middle Eastern adversary before President George W. Bush leaves office. Although Bush once called Iran part of an axis of evil and says Iranian President Mahmoud Ahmadinejad is dangerous, he also had allowed a variety of tentative overtures toward Tehran.

The best-known effort would have had Secretary of State Condoleezza Rice sit down for negotiations over Iran's disputed nuclear program, with the tantalizing prospect of expanded talks on other subjects. She said she would go anywhere to have those conversations, including Tehran, if Iran met its side of the bargain.

That offer went nowhere, in part because Iran refused to meet the U.S. terms to begin talks.

A diplomatic office in Tehran would have served several purposes. It would provide a public face for the U.S. government in a country where suspicion of the United States runs deep and perhaps increase U.S. influence. It also might have made it easier for Iranian citizens to apply for visas to visit the United States.

The idea of creating an interest section in Iran similar to the one the United States runs in communist-run Cuba has been around for some years. It gained new traction in June when veteran diplomats began to look again at the plan with Rice's blessing.

Rice never publicly endorsed the concept but allowed it was one of several things the administration was considering to improve contact between the Iranian and American people. At one point, there was speculation that an announcement on the matter might be made in late August, which came and went with no action.

Although Iran has a small interest section in Washington, the two countries do not have diplomatic relations and the United States has had no official presence in Tehran since the 1979 Islamic revolution and subsequent takeover of the U.S. Embassy and hostage crisis. U.S. interests in Iran currently are handled by the Swiss Embassy.

While the Bush administration has given up on opening the interest section in its waning months in office, it has gone ahead with promoting unofficial contacts with Iran.

Late last month, the Treasury Department gave special permission to the private American-Iranian Council to open an office in Tehran. The office plans to promote educational and cultural exchanges by hosting round-table discussions and conferences.

The Princeton, New Jersey-based council will join a handful of other think tanks and policy institutes that have similar licenses from the Office of Foreign Assets Control to work in Iran, which is under heavy U.S. sanctions over its nuclear program and support for groups the United States labels as terror organizations.

The executive director of the council, Brent Lollis, expressed hope that the opening of the office would improve ties between Iranian and American academics and eventually lawmakers. He also said he hoped it could help pave the way for the opening of a U.S. interest section in Tehran.

"We are in full support of an interest section, and we hope that it will come about," he said. "This is a good beginning for that."