Even though the International Atomic Energy Agency (IAEA) resolution left the door open to more talks and refrained from bringing Iran before the UN Security Council for possible sanctions, Iranian negotiator Cyrus Nasseri said: "Iran will not bend. Iran will be a nuclear fuel producer and supplier within a decade."

The Iranian foreign ministry spokesman Hamid Reza Asefi said in Tehran that the IAEA resolution was "unacceptable" and a "political resolution adopted under pressure from the United States and its allies."

The resolution by the IAEA's 35-nation board of governors, expressing "serious concern" at Tehran's decision to resume uranium conversion activities, set a September 3 date for a report on Iran's compliance which could lead to a new emergency IAEA meeting and possible referral to the Security Council for sanctions.

US President George W. Bush welcomed the resolution as "a positive first step" and said US strategy was to work with the Europeans "so that the Iranians hear a common voice speaking to them about their nuclear weapons ambitions."

UN Secretary General Kofi Annan called on Iran to halt nuclear fuel work.

"The (IAEA) has spoken with one voice and the secretary general expects its resolution to be implemented."

Uranium conversion produces a gas that is the feedstock for enriching uranium, which fuels nuclear reactors or is potentially the raw material for atom bombs.

Washington charges that Iran, which hid its nuclear enrichment program for nearly two decades, is secretly developing nuclear weapons.

The resolution said Tehran should stop the nuclear fuel cycle work that has raised Western fears that it wants to develop nuclear weapons, a charge it denies.

Iran was urged "to reestablish full suspension of all enrichment-related activities including the production of feed material, including through tests or production at the uranium conversion facility."

The resolution came on the third day of talks at the Vienna-based IAEA and a day after Tehran had raised the stakes in the dispute by removing IAEA seals at a conversion facility in Isfahan, 400 kilometres (250 miles) south of Tehran.

Nasseri said "what is absurd is that a decision is passed here which betrays" the IAEA's "ability to verify that a peaceful facility remains peaceful."

Tehran had voluntarily halted the work at Isfahan in November 2004 as a goodwill gesture to kick-start nuclear negotiations with the EU.

Nasseri said Iran had a right to carry out fuel cycle work for peaceful purposes under the nuclear Non-Proliferation Treaty (NPT) and refused to abandon such activities. Any future talks would have to be on this basis, he said.

IAEA chief Mohamed ElBaradei said however that he saw a "window of opportunity" for talks since both sides remain willing to negotiate.

Iran had earlier warned that its accord with the European Union would become void if the IAEA adopted the resolution.

Under the accord, Iran agreed to suspend uranium conversion and enrichment fuel cycle work for the duration of negotiations aimed at winning guarantees that its program is purely peaceful, as Tehran maintains, in return for trade, security and technology benefits.

Nasseri told reporters that "operations in Isfahan will continue under full-scope safeguards" and that Iran was fully within its rights.

He said Iran would maintain its suspension of enrichment activity at another facility, in Natanz, "to keep the door open for negotiations."

French representative Philippe Thiebaud told the board however that a total suspension was necessary since the IAEA is still pressing Iran to answer questions about almost two decades of hidden nuclear activities up to 2002.

ElBaradei said the "jury is still out" over whether there are "undeclared nuclear materials or activities in Iran."

Thiebaud said the Europeans "are willing to continue discussions (with Iran) in the framework of the Paris agreement" but were also ready to consider "any proposals or new ideas" from Iran.

ElBaradei said the two sides were scheduled to meet in Paris at the end of August and "I hope that meeting will go through."

Encouraged by Iran, non-aligned nations at the IAEA had opposed the draft resolution and forced a delay of more than an hour in Thursday's formal board session as intense, closed-door negotiations continued.

In its statement to the board, the Non-Aligned Movement stressed that "all problems should be resolved through dialogue and peaceful means, and in this regard calls on EU-3 and Iran to continue with their dialogue with the view to achieving a mutually long-term agreement in the mandate of the IAEA."

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