The diplomat, speaking on condition of anonymity, said that Iran's decision to reject EU incentives, aimed at ensuring it does not develop nuclear weapons, and resume uranium conversion work meant that the EU's role was practically at an end.

"If the Iranians changed their minds and decided to restart the suspension or discuss restarting the suspension, I think that would be very interesting, but that doesn't seem remotely likely," he said.

The official said the EU had been trying through negotiations since 2003 to convince Iran to maintain a civilian nuclear programme but that "the bracket we have opened has been closed."

"The logical step is for this to be reported to the (UN) Security Council."

The United States suspects the Islamic republic is trying to develop nuclear weapons and has long threatened to refer the issue to the Security Council.

Iran says its nuclear programme is a peaceful effort to generate electricity -- something it insists it has a right to do as a signatory of the nuclear Non-Proliferation Treaty (NPT).

But its past record of hiding its activities, suspicious research work and black market procurements have aroused fears this energy drive is merely a cover for secret atomic weapon programme.

The European bloc has resisted calls for a referral and offered trade and other benefits in exchange for pledges on its nuclear plans, after striking an accord with Tehran in Paris last November.

Those talks -- spearheaded by the so-called EU-3 of Britain, France and Germany, as well as EU foreign policy chief Javier Solana -- broke down last month.

"We are now coming to a crunch point," the diplomat said, but he added that it was important to inform the Security Council first, rather than demand sanctions, to give more power to the International Atomic Energy Agency (IAEA).

"It's reasonable at this stage to put the authority of the Security Council behind the IAEA," whose board of governors meeting on September 19 to talk about getting Iran to halt uranium conversion, a precursor to enrichment.

"It's not the moment to start talking about sanctions," he said.

According to a spokesman for the French foreign ministry, the IAEA meeting will decide "what steps should follow".

The diplomat also suggested the EU was bewildered by Iran's decision to resume conversion, and feared that speculation about its atomic ambitions could fuel an arms race in the Middle East.

"Exactly what does this programme fit into? If it is a peaceful one, where are the nuclear power stations?" he said.

"If there were other people in the Middle East who even suspected that Iran has a nuclear weapons programme then they might feel encouraged to do the same themselves, he said."

Separately, a British think tank said that Iran was at least five years away from producing enough material for a nuclear bomb, but in any case diplomatic efforts to hold it back were failing.

"Iran is now much less worried about the US attacking them because of the mess in Iraq... They're testing the waters," Gary Samore of the International Institute for Strategic Studies (IISS) said in London.

Samore, who edited and presented the IISS report entitled "Iran's Strategic Weapons Programmes -- A Net Assessment," at a press conference, said Iran would resist international diplomatic pressure.

"It will be important to apply international diplomacy in a way that does not inspire Iran to abandon all restraint and seek a nuclear weapons capability," added IISS director John Chipman.

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