Iran broke the seals placed by International Atomic Energy Agencyinspectors on the uranium conversion plant in Isfahan, giving the facility full operational capacity after Iran ended a nine-month shutdown there on Monday.

"We have removed the seals, the Isfahan conversion facility is fully operational," the deputy head of Iran's atomic energy agency Mohammad Saidi told AFP. "It is happening under the supervision of the Agency."

The IAEA board will meet Thursday at 1300 GMT to consider a resolution put forward by Britain, France and Germany calling on Iran to stop the sensitive nuclear fuel work, a spokesman said.

The move is the latest challenge by Iran to the European Union and the United States, which have expressed serious concern about its resumption of conversion and angry rejection of a proposed EU deal on its nuclear programme.

US Deputy State Department spokesman Adam Ereli said Washington hoped the IAEA meeting would "send Iran a strong message".

But he would not say whether governors of the 35-member agency were ready to adopt a tough resolution. "That's what we're working toward."

According to a draft of the EU resolution, Iran should re-establish "full suspension of all enrichment-related activities including the production of feed material, including through tests or production at the Uranium Conversion Facility."

But in an indication of the difficulty of pushing the resolution through, a meeting was cancelled Wednesday as non-aligned states led by Malaysia opposed the draft as it risked causing a backlash from Tehran, diplomats said.

Crucially, the resolution does not call for Iran to be referred to the UN Security Council for resuming the nuclear work, a move that could lead to Tehran facing punishing international sanctions.

China's UN ambassador Wang Guangya said such action would not be "helpful".

The IAEA has been investigating Iran's nuclear programme for more than two years and although it has criticised the Islamic republic for failing to declare certain activities, it has not found any evidence it is developing the bomb.

At Isfahan, uranium ore, or yellowcake, is turned into gas, which is then used to make enriched uranium, the final product of which is fuel for nuclear power plants or, in highly refined form, the explosive core of atom bombs.

Iranian workers removed the seals themselves under the supervision of the IAEA, which has placed surveillance cameras at the plant.

Iran had suspended uranium conversion and enrichment in November as a goodwill gesture ahead of the EU talks aimed at staving off Security Council intervention.

Iran emphasises that its right to the nuclear fuel cycle is legally enshrined under the Non-Proliferation Treaty and it has infringed no international rules by resuming the activities.

The United States accuses Tehran of seeking to manufacture a nuclear weapon, a charge vehemently denied by Iran, but Washington points to Iran's past failure to transparently report nuclear activities as grounds for suspicion.

New President Mahmood Ahmadinejad has described the EU offer of nuclear cooperation as an "insult."

But while Ahmadinejad's comments published on Tuesday appeared to confirm Western fears he will adopt a tough line on the nuclear issue, he also emphasised he was leaving the door open for more talks with the Europeans.

This apparent willingness to continue the talks process was welcomed by Germany, with government spokesman Bela Anda saying negotiations were the only "reasonable way to a constructive resolution of this issue".

Ahmadinejad has yet to appoint a new government but one of the candidates for the post of foreign minister - parliamentary foreign affairs committee head Aleaddine Boroujerdi - made clear there was no going back on the move.

The best guarantee that Iran's nuclear programme is peaceful was the "infallible watching of the IAEA cameras," he said. "I hope that the Europeans will also accept this reality."

He added that the regime has still not made any decision on restarting Iran's uranium enrichment plant in the city of Natanz. Enrichment remains suspended but officials emphasise this is only temporary.

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