A source said Iran would inform the UN nuclear watchdog on Monday that it would immediately resume uranium conversion activities, a dramatic move that heightens the risk Tehran will be hauled before the Security Council for possible sanctions.

The move came after Iran demanded that the European Union deliver its latest proposals in a mooted nuclear deal by Sunday, a call that was only answered by expressions of astonishment and fury by the countries involved.

However it remains to be seen whether the Islamic republic will stand by its rhetoric and take the consequences. A last minute U-turn cannot be excluded after such a change of mind was made in a similar situation in April.

Iran will "on Monday give the IAEA (International Atomic Energy Agency) the letter announcing the resumption" of uranium conversion activities ... the restart will begin immediately," the source said after a meeting of Iran's top security body.

Foreign Ministry spokesman Hamid Reza Asefi said international inspectors currently in Iran would be taken to the Isfahan facility where the IAEA seals would be "removed in the presence of the inspectors and the work will resume."

Another source close to the talks said that Iran was prepared to delay its move if the Europeans recognised its right to enrich uranium in the new proposals.

The conversion process, carried out in Iran at a facility in the central city of Isfahan, changes uranium ore into the uranium gas that is the feedstock for enrichment.

Iran agreed in November to suspend uranium enrichment, a process that makes fuel for civilian nuclear power plants but can also be the explosive core of atom bombs, during negotiations with the Europeans.

The British government, which is spearheading the EU-Iran talks along with France and Germany, reacted angrily, saying threatened resumption of sensitive nuclear activities by Iran would be an "unnecessary and damaging step."

The Foreign Office said it was seeking "clarification of Iran's intentions" and urged Tehran to avoid any unilateral move which "would make it very difficult to continue" the negotiations with the European Union.

In Paris, a diplomat described the Iranian threat as "barely acceptable pressure that leads us to express our surprise and our concern."

Iranian nuclear negotiator Ali Agha Mohammadi earlier had made clear a new ultimatum, saying that if Iran did not receive European proposals by 5:00 pm (1230 GMT) Sunday, "we will resume some of our activities in Isfahan tomorrow."

But he added: "Our position is that we want to pursue the negotiations with the Europeans."

For his part, Asefi said there was a Monday deadline for the EU offer. The Europeans have previously said they intended to submit the proposals after hardline president Mahmood Ahmadinejad takes office on August 3.

"We have had reports that the proposals were empty but wrapped up in a pretty package," Asefi said. "The Security Council is not the end of the world."

Tehran insists it has the right to enrichment under the nuclear Non-Proliferation Treaty (NPT) and the issue has been one of the chief stumbling blocks in the process with the Europeans.

Washington accuses its arch enemy of seeking nuclear weapons, a charge vehemently denied by the Islamic republic, and the negotiation process with the EU is aimed at avoiding Tehran being brought before the Security Council.

The EU-3 is "warning about the consequences of breaking the suspension and that this will lead to the matter being taken to the UN Security Council," another diplomat told AFP on Saturday in Vienna, the headquarters of the IAEA.

A diplomat close to the IAEA would not comment on whether the inspectors would go to Isfahan for the removal of the seals but said: "It's business as usual. The IAEA has inspectors every month in Iran. They rotate to different places."

On Saturday, Iran said EU-3 ambassadors had sent a message informing Tehran that it would make the offer by August 7, to be followed up by an Iran-EU committee meeting on August 30 in Paris and then a foreign ministers' meeting on the sidelines of the UN General Assembly in September.

Ahmadinejad is due to address the assembly on what is expected to be his first visit abroad.

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