British Europe minister Douglas Alexander, whose country currently holds the EU's rotating presidency, said the world is watching to see what the Islamic state's new government will do next.

"Let there be little doubt... the prospect of a report to the UN Security Council remains real," he told EU lawmakers in a debate on the crisis triggered by Iran's resumption of sensitive nuclear activities two months ago.

"The responsibilty in terms of the immediate steps that now need to be taken lies directly with the Iranian authorities," he said.

Talks with the so-called EU-3 -- Britain, France and Germany -- broke down in August, when Iran slammed the door on a deal that offered incentives in exchange for a full cessation of fuel cycle work.

Iran -- which the United States suspects of trying to develop nuclear arms -- also ended a freeze on fuel cycle work by resuming uranium conversion in defiance of an accord struck with the EU-3 in Paris last November.

Both the EU and Iran have signalled they want to resume the talks, but Tehran insists it is not prepared to hear renewed demands it abandon sensitive fuel cycle technology.

The EU is clearly hoping the Iranians will blink first. "Iran is at a particularly crucial juncture," said the British minister.

"The world is watching to see how its new government will manage its economic and social policies and to see if it will be a responsible partner as judged by how it deals with international concerns," he said.

"Working and engaging with Iran will be a challenge. But we must all do our best to meet that challenge."

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