Iran would not give up construction of a heavy-water reactor, which can be used to make nuclear weapons material, in exchange for a light-water reactor offered by the Europeans, foreign ministry spokesman Hamid Reza Asefi insisted.

"We welcome such proposals but we will not under any circumstances replace our heavy-water research reactor," Asefi told a news conference.

"We will continue working on our heavy-water reactor," under construction at Arak southwest of Tehran.

German Foreign Minister Joschka Fischer warned Iran it would be referred to the UN Security Council if Tehran resumed nuclear enrichment.

"If Iran behaves in an unreasonable way, if for example it restarts enrichment... then that would lead to the Security Council," Fischer told an international security conference in Germany.

Back Asefi was unimpressed.

"We have told the Europeans to tell their American allies not to play with fire and the Europeans received that message perfectly well," he said.

The conservative-controlled parliament has muddied the waters, drawing up draft legislation requiring Iran to produce some of its own nuclear fuel.

Key decisions on Iran's nuclear programme are taken at the highest levels of the regime, but MPs have approved legislation to make a symbolic point. Last October, they passed a bill advocating continued uranium enrichment.

Britain, France and Germany are trying to convince Iran it should dismantle an enrichment programme, which the United States says is part of a covert atomic weapons development, in return for economic and political rewards.

Diplomats said EU negotiators have offered to send a mission to help Tehran obtain a light-water research reactor in what would be the first concrete move towards rewarding it for abandoning uranium enrichment.

But Tehran's stance on the Arak reactor is likely to complicate the European task amid an escalating war of words between Iran and the United States over the clerical regime's nuclear activities.

Iran insists its nuclear programme is purely for civilian energy needs, but the United States -- less than two years after its invasion of Iraq in March 2003 -- has hinted at the possible use of military force.

US Secretary of State Condoleezza Rice has said an attack is not on the agenda for the time being but has urged Europe to take a tough line with Iran.

"We don't take Rice's threats seriously," Asefi declared.

"Rice and US officials know well Iran's capabilities (of responding)," he added.

The Washington Post reported Sunday that the United States has been flying drones over Iran since April 2004, seeking evidence of nuclear weapons programmes and probing for weaknesses in Iran's air defenses.

The revelation came after the US National Intelligence Council launched a broad review of its classified data on Iran to assess its alleged weapons drive, and its impact on regional and global security.

Tehran insists its talks with the so-called EU3 which began in mid-December, must have concrete results within three months if they are to continue.

Iran's top nuclear negotiator, Hassan Rowhani, has acknowledged that if Tehran is referred to the UN Security Council, Iran cannot bank on avoiding sanctions.

"It is unlikely one of the permanent members would use their veto in favor of Iran," he said. Britain, China, France, Russia and the United States are the council's five permanent members.

Iran agreed last November to suspend uranium enrichment but as a member of the nuclear Non-Proliferation Treaty it has the right to enrich for peaceful purposes.

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