The International Atomic Energy Agency (IAEA) demanded Saturday that the Islamic republic halt its controversial uranium enrichment-related activities, a part of the nuclear fuel cycle that can be directed to both energy and weapons purposes.

President Mohammad Khatami vowed Iran would resist "exorbitant demands of the great powers", and described the IAEA ultimatum as "a sign of the moral decadence of the world and the pre-eminence of force and hypocrisy in international relations".

The Iranian government's spokesman, Abdollah Ramazanzadeh, also asserted any decision regarding the enrichment of uranium was for Tehran alone to take.

Iran agreed last year to suspend the enrichment of uranium pending the completion of an IAEA probe, but has continued to press on with related work in the nuclear fuel cycle.

Iran, which asserts it wants to enrich uranium to produce fuel for reactors and not to make a nuclear bomb, has repeatedly said it reserves the right to resume such activities at any time.

Hardliners have also lined up to condemn the resolution, asserting that nuclear fuel cycle work, including enrichment, is permitted under the Non-Proliferation Treaty (NPT) if it is for peaceful purposes.

But the official word in Iran on the nuclear dossier is from Hassan Rowhani, a mid-ranking conservative cleric and top national security official charged with handling the nuclear issue.

In the wake of Saturday's resolution, he appeared to reject it and even threatened to halt stringent IAEA inspections if the issue was referred to the UN Security Council, something the United States is pushing for.

But he said Iran could accept a suspension of fuel cycle work the IAEA wants "through negotiations" -- and Western diplomats have signalled fresh talks are likely before the IAEA's board meets again in November.

"The message is clear," said one European diplomat based in Tehran. "In all the anger and the protests is an invitation to continue the dialogue and try to find a solution.

"But there are just two months to get a result," added the diplomat, referring to the deadline set for a new report on Iran's compliance with the IAEA. The IAEA's board is due to meet again in November.

The alternative is Iran being branded as being in breach of the NPT and reported to the Security Council, something Tehran -- and many in the international community -- wish to avoid.

Iran was already confronted with a similar deadline last October, and at the last minute -- through negotiations with Britain, France and Germany as well as a whirlwind trip by the foreign ministers of the European states -- chose to comply.

Since then, however, the stakes have risen amid accusations that Iran has merely been playing for time and impatience among the European Union's so-called "big three".

The three EU countries have been pushing for Iran to abandon fuel cycle work completely in exchange for increased trade and political benefits, something they feel would send a signal of Iran's total disinterest in even having a nuclear bomb "option".

But Iran has so far refused, and it remains to be seen if the Europeans -- who have been resisting US efforts to have Iran sent to the Security Council -- are prepared to have negotiations pan out much longer.

"The question is how to convince the Iranians," said another diplomat. "There are pragmatists in Iran who do not want to be isolated, but a lot of imagination will be required."

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