"My own advice to the Iranians is to create an environment that will allow the negotiations to go forward," Annan told reporters as Tehran warned of a world oil crisis if sanctions are imposed over western accusations that Iran is covertly seeking to build nuclear weapons.

"I think they (Iranians) should not escalate, they should not press ahead with their nuclear fuel research. We need time to build confidence and trust so that these negotiations will take place in an atmosphere which is appropriate," the UN chief said.

He spoke as the United States and key European nations scrambled to line up support to haul Iran before the UN Security Council, which can impose sanctions in cases of threats to international peace and security.

Britain, France and Germany, backed by the United States, have called for an emergency meeting of the International Atomic Energy Agency (IAEA) on February 2, a first step before possible UN Security Council referral.

Iran insists it is not seeking to build nuclear weapons and that it has the right to develop atomic energy for electricity generation. It has threatened to suspend snap inspections by the IAEA if it is brought before the Security Council.

But the Western powers have rejected Iran's call for a return to direct talks, Britain describing it as "vacuous", unless there is a return to the fuel cycle suspension.

"I would hope that as the dicussions go on, the Iranians would see the need to come back to the table but come back to the table in a genuine spirit of searching for a solution," Annan said.

"Because if indeed their intention is a peaceful nuclear capability the international community have given assurances that they will make sure they do have the fuel necessary."

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