"It is a plane that does not fly," Russian ambassador Grigory Berdennikov told AFP about the draft resolution circulated by EU negotiating trio Britain, France and Germany at a meeting in Vienna of the UN watchdog International Atomic Energy Agency (IAEA).

At stake is getting Iran to halt nuclear fuel work which it began last month and which has scuttled talks with the EU on guaranteeing Iran's atomic program is peaceful and fanned fears that the Islamic Republic is secretly developing nuclear weapons, as the United States claims.

Western diplomats said EU negotiators Britain, France and Germany were making a tactical move to win a consensus against Iran at the IAEA's 35-nation board of governors even if this meant putting off referral to the Council, which could impose sanctions, until the next board meeting in November.

In Paris, French Foreign Minister Philippe Douste-Blazy said "the priority is the unity of the international community" as a means of putting pressure on Iran.

Russia, China and non-aligned nations back Iran's right to what it says is a peaceful nuclear program and fear that Security Council actions could escalate into calls for trade sanctions that would draw sharp retaliation from the Iranian oil giant, diplomats said, adding that Russia is the key player.

If unanimity is not achieved for its new draft resolution, the European trio were ready to go back to and demand a vote on a previous, more hardline draft they had distributed earlier in the week that called for Iran's immediate referral to the Council, diplomats said.

The United States is pushing for this both in Vienna and in Washington and the three European capitals, diplomats said

Diplomats agreed that the West would win a vote on this first resolution but warned that lack of consensus would not have a strong impact on Iran and would be a prelude to paralysis at the Security Council, which unlike the IAEA has enforcement powers but where nuclear states Russia and China have vetoes.

A European diplomat said the European trio "are determined to leave the current board meeting with an outcome" one way or another, after two years of negotiations with Iran and over two years of an IAEA investigation that has failed to resolve crucial questions about Tehran's nuclear work.

US ambassador Gregory Schulte said "reporting Iran's non-compliance (with the nuclear Non-Proliferation Treaty - NPT) is long overdue."

A Western diplomat said the reason for a delay in referral was to give the Russians time to accept such a move, especially since the EU's call is to get Iran to work better with the IAEA and not to go immediately for trade sanctions.

Russia has large commercial interests in Iran, including an 800 million dollar (615 million euro) contract to build the country's first nuclear power plant. China meanwhile is a major purchaser of Iranian crude oil.

A Western diplomat said the Russians had at a meeting with the so-called EU-3 crossed out clauses that cited Iran for non-compliance with international nuclear safeguards and opened the door to eventual referral to the UN Security Council, even if the Council was not specifically mentioned.

The new draft resolution had been "a tactical gesture to show flexibility. It didn't work," the diplomat said.

The haggling in Vienna came as Iran held a military parade of thousands of troops and a range of military hardware including missiles bearing messages of "Death to America," prompting a diplomatic protest from European attaches.

Iranian ambassador Mohammed Akhondzadeh said in Vienna that Iran has been cooperating with the IAEA and invited IAEA chief Mohamed ElBaradei to Tehran for what would be his first visit since President Mahmoud Ahmadinejad took power.

Akhondzadeh said the lack of consensus over UN referral was a "message" and that Iran believes "negotiation is the only way to proceed."

Iran has said it would stop allowing reinforced nuclear inspections if the EU pushed through any tough resolution that included a trigger for sending the case to the Security Council.

The board's non-aligned group of 13 countries, which does not include Iran, issued a draft proposal of its own rejecting referral to the Security Council and saying verification "should be resolved through peaceful means within the framework of the IAEA."

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