"It (the decision) will come at the end of the week (Friday) at the latest," said Ali Agha Mohammadi, a spokesman for the Islamic republic's Supreme National Security Council.

He said Foreign Minister Kamal Kharazi, members of the hardline-controlled parliament and the top national security body would be holding discussions on Tuesday and Wednesday to finalise a decision.

"In several days you will hear the news of what we have decided," Kharazi was quoted as saying by the state news agency IRNA. "The Europeans ... want a total halt of our nuclear programme, which is not a legitimate demand in our eyes."

Diplomats from Britain, France and Germany have made clear that any resumption by Iran of fuel cycle work -- the focus of international fears the country may be seeking to develop nuclear weapons -- would be considered a violation of a November 2004 suspension agreement that opened the negotiations with Tehran.

Iran has said it wishes to restart work at a plant in Isfahan, used to convert mined uranium "yellowcake" into a feed gas for centrifuges that carry out the enrichment process.

Enriched uranium can be used for peaceful power generation but also as the explosive core of a nuclear bomb.

But Iran's tough stance drew fresh warnings.

"We hope that Iran will not take such a decision," said French foreign ministry spokesman Jean-Baptiste Mattei.

"We hope that Iran will remain within the framewok of the November 2004 agreement, which stipulates the suspension of activities tied to enrichment and reprocessing, including conversion," he said.

The Europeans could side with the United States and seek Iran's referral to the UN Security Council, which could in turn choose to impose sanctions.

The United States also warned Iran on Monday that a resumption of its suspended nuclear fuel activities would have what it termed "consequences".

Acting US State Department spokesman Tom Casey said any move by Iran to resume activities such as preparation of uranium for enrichment "would be in clear violation of its suspension pledge and its agreement with the EU-3".

"We'd have to look very carefully at what the next steps would be," he said.

But speaking in Moscow, European Union foreign policy chief Javier Solana said he favoured first transferring the case to the International Atomic Energy Agency (IAEA) if the talks break down.

Iran has voiced frustration over the progress of the talks with the EU-3, in which the EU are offering a package of incentives in return for "objective guarantees" that Tehran will not develop weapons.

The sticking point is Iran's ambition to master the full nuclear fuel cycle, and European demands that Iran abandon such work because it would also deliver a capacity to make a bomb -- even if Iran says it only wants to make fuel for power reactors.

While Iran has made clear it wishes to kick-start operations at Isfahan, it remains unclear how far they will go in challenging the suspension agreement.

At Isfahan, yellowcake is first converted into uranium tetrafluorideand then into uranium hexafluoride (UF6). This gas can then be sent to a nearby facility at Natanz, where the enrichment process itself is carried out.

Iran has so far insisted that it does not intend immediately to restart activities there, but its diplomats have been coming under increasing pressure from hardline deputies who want a total resumption of enrichment.

Tehran has been subject to over two years of investigations by the IAEA after it emerged the country had been covering up its activities for 18 years.

Since then, the IAEA has uncovered plenty of suspicious activity -- including black market shopping for dual-use technology -- but no "smoking gun".

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