KABUL (Reuters) - The Taliban's supreme leader rejected on Tuesday reports he had sent a letter to the Saudi king involving a formula for ending the war in Afghanistan and conditions for talks with the Afghan government. Mullah Mohammad Omar, who carries a bounty of $10 million by the United States for his capture, also denied reports saying members of the Taliban's resurgent movement had held talks with pro-Afghan government officials on ending the conflict. "The fact is that the Islamic Emirates has neither held any negotiations in Saudi Arabia or in the United Arab Emirates and neither anywhere else," the Taliban's Website quoted Omar as saying in a statement. "I neither have sent any letter addressed to Saudi... King Abdullah bin Abdul-Aziz, or to the opposite side (Afghan government) and neither have (I) received any message from them." The statement added that whatever was being said on this issue was false and part of a propaganda campaign by vested interests. An Iranian press report had initially said Omar had sent a peace formula to the Saudi king. Other media also spoke about a formula, which included the replacement of tens of thousands of NATO-led troops in Afghanistan by soldiers from Islamic nations, and power sharing with President Hamid Karzai, who has been leading the Afghanistan government since the Taliban's removal in 2001. In the statement, Omar did not repeat the Taliban's past line that the Islamist movement would fight to the last to expel NATO-led troops from Afghanistan, nor mention under what terms the Taliban might engage in talks. A tentative first step toward talks was taken in September when pro-government Afghan officials and former Taliban members met in Saudi Arabia. A second round was expected too. Then the Taliban derided the talks and said they would not enter negotiations as long as foreign troops remained in Afghanistan. Nevertheless, the September meeting offered a glimmer of hope of ending an intensifying Taliban insurgency that has raised fears for Afghanistan's prospects and Western efforts to establish peace and build a stable state. With the spread of the Taliban insurgency more than seven years since their overthrow, and no sight of an end to the conflict, the possibility of talks with the insurgents, or at least some elements, is being considered by Karzai's government and Western allies. They hope to draw moderate Taliban, or perhaps opportunistic commanders, into talks to isolate al Qaeda and its hardline supporters, analysts say. Violence this year in Afghanistan has been the bloodiest since the Taliban's ouster. About 70,000 foreign troops, 32,000 of them American, are struggling against the Taliban, whose influence and attacks are spreading in the south, east and west.