According to a report in the Financial Times, Britain, France and Germany have drawn up a list of 34 Iranian entities and 10 people they would like to see punished for helping in Tehran's enrichment of nuclear fuel.

Officials who spoke to AFP played down the report, insisting that the list had not been finalised, but confirmed talks were ongoing. "It's a preparatory draft," said one. "It's not a final list," added another.

Again according to the Financial Times, EU members Greece, Cyprus, Spain, Austria and Sweden are opposed to Europe taking new measures against Tehran, perhaps explaining why diplomats were reluctant to talk publicly.

"I can't confirm this list," French Foreign Minister Bernard Kouchner told reporters when asked about the FT article.

"Specific European sanctions have been suggested, and worked on a little," he confirmed, adding however: "No decision has been made on sanctions under the auspices of the European Union."

The list cited in the Financial Times report includes names already under United Nations and United States sanctions, but also adds new Iranian targets for a possible round of European measures.

These include the Sharif University of Technology, Iran Air Cargo, the Iran Insurance Company, Bank Tejarat, the economic arm of the Revolutionary Guards and the Razi Institute for Serum and Vaccine.

News of the possible new sanctions came a week after UN nuclear watchdog, the International Atomic Energy Agency, warned that Iran had ignored previous measures and had continued enriching uranium to make nuclear fuel.

And on Wednesday, Iran began testing its first nuclear reactor at the Bushehr power plant, which has been under construction for 14 years but which is now within months of opening, according to Iranian officials.

Washington and Europe believe Iran's civil nuclear power programme masks a plan to build atomic weapons, a move that would fundamentally alter the balance of power in an already volatile Middle East region.

In Paris, Brussels and Berlin, diplomats said they believed the threat of new European sanctions could strengthen the hand of US President Barack Obama as he attempts to engage Iran in a dialogue on the issue.

An official in the office of EU foreign policy chief Javier Solana said any new openness in White House policy would need to be backed up by "a firmer hand on the sanctions side."

But he cautioned: "It's still too soon to say whether the Americans will also come to this conclusion."

France for its part is worried that Obama will reach out to Iran too early and thus give a boost to President Mahmud Ahmadinejad before June's election, when he will face a challenge from reformist leaders.

Washington appears to want to take steps as quickly as possible, amid fears that the current hardline regime is on the verge of a nuclear breakthrough, even if that hurts the chances of Ahmadinejad's more amenable opponents.

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