The Islamic republic's defiant remarks came as European, American, Chinese and Russian officials prepared to discuss the crisis in London on Monday.

They are expected to set a date for an emergency meeting of the International Atomic Energy Agency's (IAEA's) 35-nation board of governors.

Both the EU and the United States are pushing for Iran to be referred to the Security Council over what they fear is a covert weapons drive, leaving Tehran exposed to the threat of eventual sanctions.

But Iranian foreign ministry spokesman Hamid Reza Asefi asserted Iran had "not crossed any red line" in what the clerical regime asserts is an entirely legal bid to generate only atomic energy.

And Economy Minister Davoud Danesh-Jaafari said "any sanctions in the current situation would be more detrimental for the West than for Iran.

"Iran is in a very important regional situation, and any disturbance of the economic and political situation of the country could turn the regional situation into a crisis and increase the price of oil higher than what the West expects," he was quoted as saying by state television.

"There is no legal basis to send our case to the Security Council, but even if it goes there the Islamic republic is not scared. Our red line is to guarantee our interests," Asefi told reporters.

Negotiations, he insisted, "are the only way to find an acceptable solution for all sides."

Iran this week resumed nuclear research -- involving small-scale enrichment to test centrifuges. It insists this is separate from full-scale uranium enrichment, which remains frozen for the time being.

Enrichment can produce reactor fuel but can also be extended to make the core of an atomic weapon. The West fears that if Iran is allowed to master the technology via this research work it would gain the know-how to make a bomb.

The three main EU powers -- Britain, France and Germany -- have for more than two years been trying to convince Iran to voluntarily limit its nuclear activities in exchange for trade and other incentives.

But Iran has ruled out any such deal.

Since the shock presidential election win of hardliner Mahmoud Ahmadinejad in June last year Tehran has been progressively backing away from a temporary freeze on fuel cycle work agreed on with the EU-3 in 2003 and again in 2004.

The EU are now hoping that by calling in the Security Council, a series of IAEA calls -- so far ignored -- for Tehran to return to a full freeze of fuel cycle work would be given greater legal weight.

But Iran's parliament speaker Gholam Ali Hadad-Adel repeated Sunday that Iran would merely retaliate by limiting IAEA nuclear inspections -- crucial to the world's understanding of and control over Iran's nuclear activities.

"Based on the law approved by the Majlis, if the nuclear case is referred to the UN Security Council Iran is obliged to halt all voluntary measures and cooperation with the agency and this includes the additional protocol," he said.

On Saturday, a defiant Ahmadinejad vowed his country would not back down -- even if ordered to do so by the Security Council.

"Even if the Security Council becomes involved, it will not help resolve the issue. We are not interested in going down this path, but if some people insist on depriving the Iranian people of their rights they should know that such a thing will not happen," he told a news conference.

"Naturally, our nation will not accept anything imposed on it. It is our definitive right to have nuclear technology."

And when asked if oil- and gas-rich Iran could use its vast energy reserves as a tool in the dispute, Ahmadinejad replied his nation also has "leverage" of its own to defend its national interests.

Iran feels in a position of strength, with oil prices riding high and US forces battling insurgents in Iraq.

"They confront us and deal with us in a very harsh and illegal language, but ultimately they need us more than we need them," Ahmadinejad said at only his second news conference since his election.

"The time has passed for the language of bullying, domination and relying on your nuclear, chemical and biological weapons," he said.

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