IRAN: Iran has resumed nuclear fuel work at a uranium conversion plant near the central city of Esfahan, putting it on a collision course with the West.
The move is likely to result in Iran being hauled in front of the UN security council and face possible sanctions.
"The uranium conversion facility in Esfahan has started its activities under supervision of the International Atomic Energy Agency," Mohammad Saeedi, deputy head of Iran's Atomic Energy Organisation, told reporters at the plant.
The announcement came after UN inspectors finished installing surveillance equipment at the plant.
The EU, represented by Britain, France and Germany, had already called an emergency meeting of the IAEA board for today, during which an ultimatum demanding a suspension of nuclear fuel work is expected.
A Foreign Office spokesman said Britain would raise the issue at the crisis meeting in Vienna.
"We are not going to speculate on the outcome of that meeting," a foreign ministry spokesman said.
"However, our position is well known - were Iran to resume any part of uranium enrichment activity, including at Esfahan, this would be a breach of the Paris agreement signed in 2004."
Iran has started a gas conversion process that converts raw uranium ore, known as yellowcake, into uranium hexafluoride gas. This can then be used to enrich uranium that can be used in nuclear power plants or can be further enriched to make a nuclear bomb. However, Tehran has stressed that it is not starting work on this sensitive second phase.
Washington says Iran's enrichment activities are a cover for building a nuclear bomb, an accusation Iran strongly denies. Iran says it needs to develop nuclear power in order to meet booming electricity demand.
The move comes after Iran yesterday handed over a letter to the three EU ambassadors, officially rejecting a package of economic, technological and security proposals from the EU, calling it "unacceptable". The incentives were aimed at guaranteeing an indefinite suspension of enrichment activities.
"The EU proposal was very insulting and humiliating," Mr Saeedi said.
The EU has been in talks with Tehran for two years and in November Iran agreed to a voluntary suspension of nuclear fuel work at the Esfahan plant.
Tehran has not hidden its frustration at the slow pace of negotiations.
Reuters reported the mood at the Esfahan site was that of excitement, as workers wearing white overalls, face masks and hard hats opened a lid of yellowcake and fed it into the processing line.
Signalling a new hardline stance to its nuclear policy, Tehran yesterday replaced its chief nuclear negotiator, Hassan Rohani, with Ali Larijani, a conservative former head of state broadcasting. The appointment was made by Iran's new ultra-conservative president, Mahmoud Ahmadinejad. Both men are known to have close ties to Ayatollah Ali Khameini, who determines foreign policy in Iran.
Mr Larijani has described giving up Iran's right to uranium enrichment in exchange for EU incentives as like swapping "a pearl for a sweet".
Tehran said it was not concerned about referral to the security council.
"If one day, Iran's case is referred to the UN security council, we are not worried. If the Europeans choose this way, it's up to them to see if it is to their benefit or not," foreign ministry spokesman Hamid Reza Asefi said.
Analysts say that Iran is counting on its close economic ties with China and Russia, who are in a position to veto a UN security council resolution for economic sanctions against Iran, to stall the sanctions process.