According to a confidential text obtained by AFP and confirmed by diplomats here, Britain, France and Germany are offering valuable nuclear technology if Tehran complies and threatening possible UN sanctions if it does not.

This carrot-and-stick approach would include a light-water reactor if Iran indefinitely suspends all uranium enrichment activities.

Political directors from the foreign ministries of Europe's big three were holding the talks with Amir Hossein Zamani-Nia, the Iranian foreign ministry's international political affairs director.

Zamani-Nia refused to talk to reporters as he entered the meeting, taking place at the French mission in Vienna.

Pirooz Hosseini, Iran's ambassador to the UN watchdog International Atomic Energy Agency (IAEA), told AFP earlier that Iran expected to hear a proposal from the European trio but that no decision would be reached Thursday.

"We have to receive the text and then take it back to our capital and see if it is approved, and if it is not approved, then that is another story," he said.

The meeting is designed to give Iran a last chance to come clean before the IAEA decides on November 25 whether Iran is cooperating with it or not.

Iran refused Wednesday to give up on producing enriched uranium, which is the process used to make fuel for civilian reactors but also the explosive core of nuclear weapons.

"We demand respect for our rights to have nuclear technology for civilian use," President Mohammad Khatami said, while adding that Tehran was open to "dialogue and negotiation."

The United States wants the IAEA, which since February 2003 has been investigating Iran on US claims that the Islamic Republic has a covert nuclear weapons program, to send Iran to the UN Security Council, which could impose punishing sanctions.

But the European trio have so far opposed this, favoring instead a policy of "constructive engagement" to get Tehran to cooperate.

They reached an agreement with Iran in October 2003 to suspend uranium enrichment, but this did not include support activities such as building centrifuges and making the feed gas for the enrichment process.

The Europeans are now ready to promise Iran a range of measures, including access to nuclear fuel for its civilian reactors and recognizing Iran's right to a peaceful nuclear power program, according to a seven-page confidential paper the trio presented to the G8 group of industrialized nations last week in Washington.

"We would support the acquisition by Iran of a light water research reactor," the paper said, adding that the EU would "be ready to resume negotiations on an EU/Iran trade and cooperation agreement," and back Russia's building of a nuclear reactor for Iran.

The Europeans also promised help on a range of "political and security issues," saying they would continue to regard the main Iranian resistance group the People's Mojehidin (MEK) "as a terrorist organization."

If Iran does not carry out a full, verified suspension of enrichment, the European trio would join the United States in calling for it to be hauled before the Security Council, the confidential paper said.

The Europeans said they were prepared to go even further and "if an initial political call to Iran were not successful, the Security Council could then consider making the suspension mandatory.

"It could also consider strengthening the powers of the IAEA to carry out inspections in Iran," the document added.

The next step would be sanctions under Article 41 of the UN charter, the Europeans said, adding however that "we do not need to consider that in more detail at this stage."