UN sanctions could follow if Iran did not accept the deal, the diplomats told AFP, citing the package being written by European Union nations Britain, Germany and France.

The offer was to have been reviewed Friday in London by the five permanent UN Security Council members plus Germany, but this meeting will likely be postponed until next week.

"The package has not been approved. It is under development," Under Secretary for Political Affairs Nicholas Burns said late Tuesday in Washington.

"We will be meeting probably next week in London," instead of Friday as planned, but he said the talks on new incentives are progressing.

Under the draft deal Russia would enrich uranium on Iran's behalf.

Enrichment is a process that makes fuel for nuclear power reactors but can also produce the core of a nuclear weapon.

Iran's hardline President Mahmoud Ahmadinejad has warned he will reject any new EU offer requiring the Islamic republic to halt uranium enrichment.

Diplomats said this could doom any proposal, as the EU, backed by the United States, insists on Iran giving up uranium enrichment work.

A Western diplomat said the United States could "accept the idea of an international consortium to provide advanced, proliferation-resistant light-water reactor assistance to Iran, but only in the context of an agreement in which Iran has verifiably agreed not to pursue uranium enrichment, including research, for the foreseeable future."

The diplomat said Washington was pleased that the EU has "for the first time committed itself to specific United Nations Security Council sanctions on Iran if Iran fails to comply."

The European Union had pledged Monday in Brussels to make a "bold" offer to persuade Iran to curb its atomic ambitions.

A light-water research reactor is considered less of a proliferation risk than a heavy-water reactor, which can produce large amounts of plutonium -- another nuclear weapon ingredient.

Offering Iran a light-water reactor needs US backing, as European companies involved in this technology would not want to endanger their business with the United States, diplomats said.

Iran, which is currently building a heavy-water reactor, insists its nuclear program is a peaceful effort to generate electricity, but the United States charges it is a cover for developing atomic weapons.

The five permanent Security Council members plus Germany are blocked over how to crack down on Iran's nuclear program after Tehran failed to comply with the Council's call on March 29 for it to freeze uranium enrichment.

Washington, along with the so-called EU-3, favors a Security Council resolution that would require compliance. This could open the door to sanctions, and even military action, if Iran continues to enrich uranium.

Iranian allies Russia and China oppose such a resolution, saying they fear an escalation of the crisis.

This leaves the EU powers now trying to find a negotiation package acceptable to Russia and China.

The Europeans, backed by the United States, had offered benefits including help in obtaining a light-water reactor last August, but Iran rejected this offer.

"The package involves Iran giving up industrial-scale enrichment and agreeing to having it done in Russia," a diplomat close to the Vienna-based UN nuclear watchdog International Atomic Energy Agency (IAEA) said.

Iran would then get trade benefits -- the Europeans have already promised to help Tehran get into the World Trade Organization.

Related Links