The International Atomic Energy Agency is now mulling a response to Iran's resumption of uranium conversion work, which can either lead to the explosive core of a bomb or nuclear fuel, including UN Security Council sanctions.

Iran has told the IAEA that it has the right to both convert and enrich uranium under the nuclear Non-Proliferation Treaty and that "there is nothing illegal in our current activities or in those we plan to do."

In a letter explaining its resumption of conversion, Iran also said that the European Union -- the driving force behind years of negotiations over Iran's controversial programme -- has previously recognised its right to the process.

"Recognised rights under the NPT, yes," said one diplomat. "But the NPT doesn't recognise the right to enrichment, it recognises the right to peaceful nuclear technology.

"In international law, where there is law, there is an obligation. Iran hasn't respected its obligations for 20 years and it must restore trust."

The IAEA passed a resolution in November 2003 accusing Iran of conducting a secret nuclear programme over 18 years, including making plutonium, which is generally only used in nuclear weapons.

The fact that Iran's main accuser, the United States, in July resumed nuclear cooperation with India, which has the bomb but is not a signatory to the NPT, did not help.

The other country that most often accuses Iran of seeking an atomic weapon is Iran's archfoe Israel, another non-signatory to the NPT that is widely accepted to have its own large nuclear arsenal.

Washington has also derided the claim by Tehran -- which controls some of the world's largest oil and gas reserves -- that it needs nuclear power to satisfy an increasingly energy-hungry domestic market.

Iran responds that it needs atomic energy to allow it to earn hard currency through oil exports.

"Iran has oil reserves for maybe a hundred years," said an Iranian oil official, requesting anonymity.

"This is not an infinite resource and you have to think of the future. Why would Iran deprive itself of this possibility when nuclear (energy) is once more, and increasingly, seen as an energy of the future?"

Iran currently produces 4.2 million barrels of oil per day, of which a third is for the domestic market. Paradoxically, Iran imports around three billion dollars worth of oil products a year owing to a lack of its own refining facilities.

The Islamic republic, which accuses certain members of the IAEA of wanting a monopoly on nuclear power and thus withholding the technology from several countries, also has the backing of non-aligned nations.

South Africa -- which abandoned a nuclear arsenal of its own built up by the apartheid regime -- Argentina and Brazil are concerned about setting a precedent by preventing Iran from producing nuclear fuel.

Some Iranian hardliners have called for Iran to withdraw from the NPT, with politicians adding that it would be impossible to sign the treaty's additional protocol -- involving more stringent monitoring -- in the present climate.

"If Iran pulls out, there will be no more checks," said one diplomat.

Despite Iran's previous deceptions, the NPT stipulates that a signatory can only be brought before the UN Security Council if "the diversion of activities to prohibited ends has been established," which is not the case at the moment.

Even if the matter did come before the Security Council, veto-holder China has always opposed such a move -- unless the smoking gun of a covert arms programme is uncovered.

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