Iran has asked for exemptions from an agreement with the European Union to suspend key nuclear fuel cycle activities, and was also rejecting a draft resolution the Europeans have prepared on its atomic program.

Closed-door consultations were due to continue at a meeting in Vienna of the UN watchdog International Atomic Energy Agency (IAEA), diplomats said.

IAEA chief Mohamed ElBaradei had Thursday said Tehran had so far failed to meet a pledge to fully suspend uranium enrichment, the process that makes fuel for nuclear power, but which can also be used to make the explosive core for atomic bombs.

ElBaradei said Iran had asked to be allowed to use 20 centrifuge devices for research.

European diplomats said Iran's request goes against promises it made in an agreement with EU negotiators earlier this month in Paris to suspend all enrichment activities.

Centrifuges aligned in a series known as cascades spin uranium gas at supersonic speeds in order to produce enriched uranium.

The IAEA is to decide whether to refer Iran to the UN Security Council, which could impose punishing economic sanctions already sought by Washington.

The enrichment freeze was forged in talks with EU negotiators Britain, France and Germany in order to help Tehran show good faith and avoid possible UN sanctions.

Iran was also taking a hardline against a draft UN resolution by the European trio.

In Tehran, Iranian President Mohammad Khatami criticized the draft as "not a good resolution," and Iran rejected a rewritten version.

The Iranian news agency IRNA quoted an Iranian diplomat in Vienna saying the revised text still called for Iran to be taken to the Security Council if the IAEA decided Iran was violating the suspension, even if the Council is never mentioned in the draft resolution.

The revised text said ElBaradei should "continue verifying that the suspension remains in place and to report without delay to the (IAEA) board should the agency find that the suspension is not fully sustained," according to a copy obtained by AFP.

A non-aligned country diplomat told AFP his group had late Thursday drawn up new amendments and would present them Friday. Iran is part of the non-aligned group at the IAEA.

A Western diplomat said the United States was ready to accept the revised resolution, if Iran gave up all its centrifuges under the suspension.

The United States has for over a year been trying to get the IAEA board to take Iran before the Security Council for almost two decades of hidden nuclear activities, but non-aligned states, as well as the European trio and Russia and China, have opposed this, saying Iran must be given a chance to cooperate with a two-year-old IAEA investigation of its nuclear program.

But Iran keeps on upping the ante.

Iran continued to produce the uranium gas that is the first step in the enrichment process only days before Monday's ban, a move one European diplomat characterized as "not very helpful" as it led to doubts about Iran's intentions and the future of the suspension deal.

Several diplomats said the Iranians were merely trying to use the centrifuges as a bargaining chip to get the Europeans to soften the resolution.

But the NAM diplomat said Iran had told his group that the IAEA has in past reports acknowledged Iran's right to carry out research with centrifuges and so the Iranian request for an exemption was "no big surprise since this has been there all the time."

Iran maintains that its nuclear program is strictly peaceful.

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