But chief nuclear negotiator Ali Larijani reiterated Iran's stance that it was ready to hold talks on its nuclear programme. Six world powers have offered a package of economic incentives to the Islamic Republic if it halts uranium enrichment.

A general view shows a heavy water plant in Arak, 320 kms south of Tehran, 26 August 2006. Iran underscored its determination to produce nuclear fuel just four days before a UN Security Council deadline to freeze the sensitive work or face the risk of sanctions.[AFP]

"Iran will continue its uranium enrichment. We want to produce our own nuclear fuel," Larijani was quoted as saying by the student news agency ISNA. "We will never stop it."

The U.N. Security Council has told Iran to suspend atomic fuel work by August 31 or face possible sanctions. The West suspects Iran is secretly trying to make nuclear weapons but Tehran says its only aim is to generate electricity.

Uranium enrichment can be used to produce fuel for nuclear power stations or material for nuclear bombs.

The Islamic Republic says international sanctions would only propel oil prices higher still, damaging the economies of the industrialised world.

"Any measure to deprive Iran of its right will not change our mind about our aim," said Larijani.

Iran on Sunday tested a long-range, radar-evading missile called Sagheb (Piercing) during war games in the Gulf. Analysts have viewed such moves in the past as a signal Iran could disrupt oil shipping routes if the atomic dispute escalated.

The United States has threatened swift action on sanctions after August 31 if Iran does not heed the U.N. demand. But analysts say divisions between the six major powers may delay any punitive measures.

Britain, Germany and France have been more cautious in public than Washington about sanctions. Russia and China, both major trading partners with Iran, have been unwilling to impose sanctions and could veto such a move in the Security Council.

ITALIAN INTEREST

Italian Foreign Minister Massimo D'Alema said in a newspaper interview Rome wanted to join talks with Tehran being led by the six major powers. Italy has strong trade ties with Iran.

Iran said U.N. Secretary-General Kofi Annan would visit Tehran on September 2, two days after the U.N. deadline expires.

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