"The European proposal is their preliminary proposition and is not definitive but it is unbalanced," foreign ministry spokesman Hamid Reza Asefi said.

Iran is also refusing to suspend indefinitely work on enriching uranium, part of the nuclear fuel cycle, as called for in the deal offered to Tehran last week by the European Three of Britain, France and Germany, he added.

"In their proposal, the Europeans sought the suspension of enrichment until a comprehensive deal is reached. During the negotiations there is no question of an unlimited suspension," he told reporters.

Nevertheless, Asefi said, the decision to engage in negotiations with the Europeans was the right one, adding: "Today we are on the right path."

The three European states presented Iran with a deal Thursday, aimed at avoiding possible UN sanctions. Under the deal Tehran would receive valuable nuclear technology if it indefinitely suspended all uranium enrichment activities.

The proposal was seen as a last chance for Iran before the UN's nuclear watchdog, the International Atomic Energy Agency (IAEA), decides on November 25 whether Iran is cooperating with the international community.

The United States wants the IAEA, which since February 2003 has been investigating US claims that Iran has a covert nuclear weapons programme, to refer Tehran to the UN Security Council, which could impose sanctions.

Tehran has long insisted it is seeking only to generate electricity and on its right to produce enriched uranium, which makes fuel for civilian reactors but which can also manufacture the explosive material for atomic bombs.

Asefi, describing last week's talks in Vienna as "amicable and frank", also called on the Europeans to guarantee their commitments to Iran.

"We must reach a point of equilibrium whereby the concerns of the Europeans are eased and our interests are guaranteed under the nuclear Non-Proliferation Treaty."

US Secretary of State Colin Powell said on Saturday that Washington had seen no sign Iran will comply with international demands and will push next month for the matter to be sent to the Security Council unless Tehran reverses its course.

Hossein Moussavian, a spokesman for the Iranian nuclear negotiating team, also told state television on Sunday that uranium enrichment would continue.

"We are not going to count on the Europeans for fuel and we will continue on our path to be independent in this matter," Moussavian said.

Iran's official news agency IRNA said on Saturday that talks between Iran and the Europeans would continue next Wednesday.

Powerful former president Akbar Hashemi Rafsanjani said that Iran would not accept being deprived of a nuclear combustion cycle, something that would be considered a "black mark in history", IRNA reported.

Conservative members of the Iranian parliament on Saturday called the European proposal unacceptable, saying it denied Iran's right under the Non-Proliferation Treaty to master the nuclear fuel cycle.

The process of mining uranium, converting and then enriching it is perfectly legal under the NPT, as long as it is for fuel for reactors. But once mastered, the fuel cycle can also provide a country with the "option" of developing a nuclear bomb.

An influential parliamentary committee earlier this month approved a bill that would force the reformist government of President Mohammad Khatami to resume uranium enrichment in defiance of the IAEA.

But a report published last week by the International Institute for Strategic Studies, a Western military and defence think tank, said that even assuming Iran lifts the suspension on its enrichment programme, "it is still probably a few years away from full scale production of enough enriched uranium for a small nuclear arsenal."

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