Iran and Russia agreed on Sunday to press ahead with negotiations aimed at easing fears of the Islamic republic acquiring nuclear weapons, and a senior Iranian official said that "progress" was being made on Moscow's offer to enrich Iran's uranium on Russian soil.

"We have reached an agreement in principle for the creation of a joint company," Vice President Gholam Reza Aghazadeh said in a joint news conference with Russia's visiting Atomic Energy Chief Sergei Kiriyenko.

Moscow's compromise plan would keep sensitive enrichment work -- which can be extended to make the fissile core of a weapon -- outside Iran, yet at the same time guarantee its access to reactor fuel needed to generate electricity.

"We have made progress," Aghazadeh said. "We think we can get an outcome which will be satisfying for the March 6 meeting," he added, referring to the next session of the 35-nation board of the International Atomic Energy Agency -- which could call for Security Council action. But Kiriyenko, who did not appear so upbeat, emphasized the proposal was "complex" and that "more work needs to be done."

The EU ministers are expected to discuss the outcome of the talks between Russian and Iran and to warn Teheran that it must be cautious in its enrichment activities, which have raised concern that it is trying to develop an atomic weapon, if it wishes to avoid further deterioration of its relationship with the EU.

Caution reigns

So far, European leaders have been reserved in their reactions to ostensible agreement between Iran and Russia.

"All reports refer to Iranian sources. We must see whether that's reliable," commented German Foreign Minister Steinmeier on Monday in Brussels. He said he was pleased that the talks between Tehran and Moscow were continuing, but that it would not be clear whether there really was an agreement until information was available from the Russian side. Ministers were hopeful that they would receive news on Monday.

EU foreign policy chief Javier Solana was also guarded. "We must be cautious. We need more information. The talks are not yet over."

"We have heard very different comments from the Iranian and Russian sides," said EU Foreign Relations Commissioner Benita Ferrero-Waldner. According to the Russians, the two parties have only been able to agree on details, she said.

Warning to Serbia

In discussions about the Balkans, the ministers are expected to endorse a report by EU enlargement commissioner Olli Rehn noting that Serbia is not fully cooperating with the UN's war crimes court in The Hague. Amid speculation that a top war crimes indictee, Bosnian Serb military chief Ratko Mladic, may have been arrested last week in Serbia, the ministers will warn Belgrade of the need for decisive action to bring suspects to justice.

The EU and Serbia began talks in November on a Stabilization and Association Agreement (SAA), seen as a first step toward EU membership. Rehn is likely to suggest that the talks progress are linked to Belgrade's cooperation.

"If there is no full cooperation anytime soon, these negotiations cannot just continue as if nothing had happened," an EU official said, and hinted that the next round of SAA talks on April 5 could be cancelled.

Dealing with Israeli sanctions

The 25 ministers are also expected to discuss how to help the Palestinian government meet its payments since Israel decided to sanction it by withholding around 71 million euros ($60 million) a month in taxes and duties.

The sanctions came as the militant group Hamas, which has launched most of the attacks on Israel and figures on the EU's terror black list, was asked to form the next government. The ministers are not expected to take a clear position on Hamas until the new government is formed and its position on recognizing Israel, renouncing violence and working peacefully for a two-state solution is made clear.

But they are likely to discuss ways to fund the outgoing government led by President Mahmoud Abbas.

"There is very active consideration being given to how we respond to the needs and the constraints of the current situation within the Palestinian territories," another EU official said.

Support for Iraq

Iraq's possible descent into civil war will also feature high on the agenda following the bombing of a revered Shiite Muslim shrine in Samarra on Wednesday and revenge attacks on Sunni Mosques and people which have left some 140 people dead.

The bloodshed only slowed after an unprecedented daytime curfew was imposed on Baghdad and three central provinces on Friday, the Muslim day of prayer.

"We do think that these kinds of attacks are intended to trigger fighting along religious-sectarian lines and therefore we support extremely warmly those political and religious leaders who have come out to try and calm down the situation," an EU official said.