"We will continue with the negotiations with the European side provided it will lead us to somewhere tangible in a matter of time," Kharazi told reporters after meeting at United Nations headquarters in New York with UN Secretary General Kofi Annan.

Iran wants to make enriched uranium, which can be fuel for civilian nuclear reactors but also the explosive material for atom bombs. The United States charges that Iran is secretly developing nuclear weapons.

The European Union is calling on Iran, in talks which opened in December, to abandon all nuclear fuel activities in order to guarantee it will not make atomic weapons.

But Iran has made a proposal that would allow it build up in phases from enrichment with 3,000 centrifuges, still enough to make one atomic bomb a year, to an industrial level of enrichment with 54,000 centrifuges, according to a copy of their proposal obtained by AFP.

Kharazi said Iran's nuclear program is "quite peaceful. It's under the supervision of the (International Atomic Energy Agency) as a watchdog.

"But we are determined to continue with our nuclear activities which are only for producing fuel needed for power plants," he said.

EU negotiators Britain, Germany and France refused at a meeting in London last week to accept a written timetable from the Iranians for the first phase of their enrichment project, diplomats told AFP.

"They wouldn't even accept that piece of paper," a diplomat close to the talks said.

A date has not been set for a future meeting, a European diplomat told AFP.

Iran then said last weekend that it was ready to resume enrichment-related activities, such as making the gas that is the feedstock for the centrifuges that refine out uranium, but not enrichment itself.

Iran had stopped all enrichment activities in November last year as a confidence-building measure to set the stage for the talks with the European trio.

German Foreign Minister Joschka Fischer warned on Monday that Iran's threat to defy the West and resume enrichment activities would torpedo the talks.

Asked if Iran was ready to resume these activities, Kharazi said Thursday: "It`s still being decided."

But a diplomat close to the negotiations said Wednesday that Iran has apparently decided not to push ahead with enrichment activities as it fears the negative diplomatic fall-out this would cause.

"They want a good report from the IAEA (at its board of governors meeting) in June and then in September. Then they can say they have had a year of good reports," the diplomat said.

Javier Solana, the EU's representative for foreign affairs, said in Washington on Wednesday that the EU might be open to a compromise to allow Iran to keep a small part of its enrichment activities.

The European trio, backed by the United States, is looking for what they call objective guarantees from Iran that it will not make nuclear weapons.

"For the moment they have not come up with anything which will give us the same kind of guarantees that a cessation (of uranium enrichment) will bring," Solana said. "They have to put some ideas on the table."

"At the end, pretty close to full cessation is probably the only guarantee that would be objective," Solana said.

The United States has been sceptical of European efforts to talk Iran out of its nuclear ambitions while promising economic and security incentives but has backed the initiative since March.

US Secretary of State Condoleezza Rice has indicated she was giving the EU-3 talks until the summer before considering whether to seek to take Iran to the UN Security Council, which could impose punishing international sanctions on the Islamic Republic.

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