Presidents and heads of government from the Group of Eight industrialised powers will hold a working dinner late Wednesday after talks in the Italian mountain town of L'Aquila, and relations with Tehran will top the agenda.

In addition to the Islamic republic's nuclear ambitions, which the West believes include plans to develop nuclear weapons, there is concern over Tehran's violent crackdown on pro-democracy demonstrators.

"Iran will be the core subject and there will be a statement that will reflect that released by the G8 foreign ministers at the end of June," a senior European diplomat told AFP, speaking on condition of anonymity.

Last month, envoys from G8 powers Britain, Canada, France, Germany, Italy, Japan, Russia and the United States met and called on Iran to quickly resolve its political crisis with "democratic dialogue and peaceful means".

Washington and some European capitals would like to back such calls with a threat of sanctions, but the diplomat said: "We won't go further in L'Aquila because Russia opposes interference in countries' internal affairs."

Relations between Iran and the West, already strained over the nuclear issue, have been further damaged by Tehran's arrest of a French citizen and several Iranian employees of the British embassy.

The Frenchwoman, a university researcher, was picked up earlier this month as she was preparing to leave the country, and has been accused of spying. One of the embassy employees is also still in custody and facing trial.

London and Paris have both furiously insisted that the detainees are innocent, and fellow European Union member governments have also made diplomatic protests over the incident.

Tehran has remained defiant, however, and Supreme Leader Ali Khamenei declared: "The Iranian nation warns the leaders of those countries trying to take advantage of the situation, beware! The Iranian nation will react."

According to European diplomats, leaders are considering protesting by temporarily recalling their ambassadors from Tehran and reducing the number of visas they issue to Iranian travellers.

That would still leave the question of Iran's nuclear programme, which Tehran insists is for civilian power generation but the West fears will leave the Islamic republic on the verge of acquiring a nuclear bomb.

US President Barack Obama has offered to hold talks with Iran on the issue, saying Washington would "extend our hand if you will unclench your fist", but a defiant Iran has so far contemptuously rejected the offer.

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