In a statement sure to further irk Washington, Iran said it would not agree to an unlimited suspension of uranium enrichment that could be used to build a nuclear bomb.

The United States for its part was pushing for the UN nuclear watchdog meeting in Vienna to adopt a resolution setting a deadline, possibly as early as October 31, for Tehran to come clean on its nuclear program or immediately face sanctions by the United Nations Security council, diplomats said.

"We want the resolution to lay out essential and urgent steps for Iran to take," a US official said.

However, Hossein Mousavian, the head of the Iranian delegation conducting talks in Vienna with the International Atomic Energy Agency (IAEA), warned that "we will not accept any bargaining for an unlimited suspension" of enriching uranium.

"Iran will not accept having to make new commitments that extend the scope of the suspension of uranium enrichment," he said.

A non-American western diplomat, speaking before the second day of talks at the IAEA, said the US would be pushing for a tougher resolution than the one drafted by Britain, France and Germany.

That resolution gives Iran a November deadline to allay concerns that it is secretly making atomic weapons or have the IAEA consider whether to take the issue before the Security Council.

"Things seem to be moving but the United States thinks something is missing. They think the European resolution can be improved," the diplomat told AFP.

"We're really just at the beginning of consultations," another diplomat said.

German Foreign Minister Joschka Fischer on Monday warned Iran it faces "serious" consequences unless it fulfils a pledge to stop uranium enrichment, which produces fuel for civilian reactors but also the explosive core for atomic bombs.

Iran, however, has so far rebuffed such warnings and insists its nuclear program was strictly for civilian purposes and within the confines of the Nunclear Non-Proliferation Treaty (NPT).

Mousavian said Monday that Iran had shown its willingness to cooperate with the international community by suspending for a year the building of centrifuges used for enriching uranium which in turn can be used for fuel or weapons.

The United States, however, maintains that Iran has not lived up to the agreement and is conducting a covert program to produce nuclear weapons.