Britain, France and Germany "are going to read the riot act to the Iranians," a diplomat close to the talks told AFP.

The European trio, leading negotiations for the European Union, will be following advice from UN nuclear watchdog chief Mohamed ElBaradei "who has warned Iran in two letters in December and January" about quality control work on centrifuge parts despite the freeze, said the diplomat, who who asked not to be named.

Centrifuges are used to spin uranium gas in order to turn out enriched uranium, which can be used as fuel for nuclear power plants but also as the explosive core of atomic bombs.

Iran, which in November pledged to suspend all uranium enrichment-related activities, has since then carried out maintenance work on centrifuge piping at an enrichment plant at Natanz, including taking parts such as valves to another location, Farayand, to test them, diplomats said.

"Maintenance work is totally permissible under the terms of the suspension. What you can't do is quality control work," the diplomat said.

"This is coming close to being a breach of the suspension agreement but still short of forcing a breakdown in the talks," the diplomat said.

The diplomat said this is how the Iranians have acted on other sensitive matters in the two years that ElBaradei's International Atomic Energy Agency (IAEA) has been investigating Iran for violations of international nuclear safeguards.

"The Iranians did not report their quality control work. IAEA inspectors came across it by chance in their verification of centrifuge components in Farayand," the diplomat said.

The Geneva talks are being conducted in the strictest secrecy, with diplomats stressing that the long-term negotiations require confidence-building on both sides.

Iran is waiting for incentive rewards, such as entry into the World Trade Organization, for its temporarily suspending enrichment.

The United States would have to support this but it is not part of the European initiative and leads the West in charging that Iran is secretly developing nuclear weapons.

Diplomats have revealed to AFP that the EU and Iran flatly disagree over the crucial issue of a permanent enrichment halt since the EU is calling on Iran to totally dismantle its nuclear fuel program but Iran insists that it has the right, sanctified by international treaties, to work on the nuclear fuel cycle.

A second diplomat said Iran also seems close to violating safeguards agreements by not telling the IAEA about the building of tunnels at a facility in Isfahan to carry out work in converting uranium ore into the gas used in enrichment.

"The Iranians should have told the IAEA about this sooner than they did," the diplomat said.

"The Iranians are doing things that worry the Europeans," the diplomat said, adding that time was becoming an issue as both sides are impatient.

But the diplomat said recent comments from top US officials, such as Vice President Dick Cheney, supporting the European initiative and saying diplomacy should be given a chance was a "positive" development.

Meanwhile, Iran's top national security official Hassan Rowhani has warned the United States that the country's controversial nuclear programme cannot be destroyed by air or missile strikes, state television reported on Tuesday.

Rowhani said such an attack would only push Iran's nuclear activities underground, and added that he would prefer to see tensions with the United States resolved by dialogue.

The meeting in Geneva is the third round of talks since they began in December in Brussels.

The talks Tuesday were on technology cooperation, with political security to be discussed Wednesday and the crucial nuclear dossier on Thursday.

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