The ultimatum was in the text of the proposals sent to Tehran earlier Friday, a summary of which was made available to journalists.

"As Iran will have an assured supply of fuel over the coming years, it will be able to provide the confidence needed by making a binding commitment not to pursue fuel cycle activities other than the construction and operation of light water power and research reactors," the letter said.

Construction of a heavy-water reactor being built at Arak "gives rise to proliferation concerns" and would have to be stopped, it said.

It added that an "essential element" of the confidence-building would be for Iran to make "a legally binding commitment not to withdraw from the NPT (nuclear non-proliferation treaty) and to keep all Iranian facilities under IAEA (International Atomic Energy Agency) safeguards under all circumstances."

The European Union, in the letter, reaffirmed "Iran's inalienable rights to the peaceful use of nuclear energy, exercised in conformity with the NPT and offered to supply nuclear reactor fuel as well as security, technology and trade guarantees in return for Iran dropping parts of its nuclear programme that could be used to build atomic bombs.

The letter was signed by foreign ministers Philippe Douste-Blazy of France, Jack Straw of Britain and Joschka Fischer of Germany as well as EU foreign policy chief Javier Solana.

Iran called the EU package "unacceptable" and has vowed to resume uranium or conversion, an initial step in the nuclear fuel cycle that is a precursor to uranium enrichment -- a step that can result in material for use in a weapons programme.

In their letter, the French, British and German foreign ministers warned that they would hold an extraordinary meeting of the IAEA board of governors set for next Tuesday if Iran did not drop its threat.

Douste-Blazy, in an interview with France 2 television said that the international community must be "very firm" with Tehran.

The IAEA meeting "is to ask the whole of the international community to tell Iran one last time that it has to choose the path of reason," he said.

"If Iran ends up not accepting (the proposals) then the matter will have to go to the Security Council and that could effectively be the start of a major international crisis."

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