Iran made the proposal to be allowed to run a pilot centrifuge project for uranium enrichment at a meeting in Paris Wednesday with EU negotiators Britain, France and Germany, according to a European official who asked not to be named.

The pilot plant would have a relatively small number of centrifuges, the machines arranged successively in order to refine out enriched uranium.

Experts have told AFP the idea is to have 500 to 2,000 centrifuges instead of the 54,000 centrifuges Iran has said it wants to build, an industrial-style arrangement which could produce large amounts of fuel for civilian nuclear reactors but also what in highly enriched form can be the explosive core of atom bombs.

The official said the European trio were "going to look at this (proposal) with experts."

"If the experts find a way to monitor this in an effective way, then why not," the official said.

The Iranians said they would allow close monitoring of a pilot facility by the Vienna-based International Atomic Energy Agency (IAEA), the official said.

The United States, which wants to haul Iran before the UN Security Council over what it says is a covert nuclear weapons program, has softened its stance and agreed to support European countries in offering Tehran trade, technology and security incentives if it gives up enrichment.

US officials however reject Iran keeping any sort of enrichment capability, saying this would leave it with the capacity to make nuclear weapons.

The Europeans told the Iranians on Wednesday that "for us it is clear Iran should not be doing enrichment," the European official said.

The European trio made it clear that Tehran must give "objective guarantees that (the Iranians) take away from their nuclear program everything that can be dangerous," in terms of proliferation of atomic weapons, the official said.

The official noted that this referred not only to uranium enrichment but also to reprocessing spent fuel, a process that can extract plutonium, which also can be used to make nuclear weapons.

But a senior European diplomat told AFP: "If you want to have an agreement, both sides will have to compromise."

The diplomat insisted that "the sheer fact that this (the Iranian proposal) is being studied, does not mean it is accepted."

"The only meaning of what is happening is that the negotiating process is alive and kicking. There is something to be discussed," the diplomat said.

The European official said the Iranians had insisted at Wednesday's meeting on enrichment as an "inalienable right" under the nuclear Non-Proliferation Treaty.

Iran and the European trio agreed Wednesday to continue their nuclear talks despite having failed to secure an agreement on uranium enrichment.

Iran had previously threatened to break off the talks that had begun in December if Wednesday's meeting in Paris failed to make progress but both sides praised the encounter as constructive.

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