Iran refused Wednesday to give up on producing enriched uranium in defiance of the West and said dialogue was the only way to resolve the nuclear standoff, on the eve of talks with the EU's Big Three.

The Islamic republic is ready to cooperate with the international community over its nuclear program provided its "rights" are respected, President Mohammad Khatami said. "We demand respect for our rights to have nuclear technology for civilian use and that no-one tries to deprive us of this," he said after a cabinet meeting. "We are ready to cooperate and believe that dialogue and negotiation are the only ways to reach an understanding."

The Iranian Atomic Energy Organization chief was more blunt, warning that Tehran would reject a European proposal aimed at defusing the standoff if it did not respect its rights to master nuclear technology for peaceful purposes. "Civil nuclear technology... is one of the legitimate rights of any country. We do not accept any proposition which does not respect our rights," Gholamreza Aghazadeh said.

Iran is under international pressure over its nuclear activities amid US allegations it could be secretly trying to build nuclear weapons, charges Tehran vehemently denies.

Diplomatic and trade incentives on offer

Iranian officials are to attend a meeting in Vienna on Thursday with British, French and German officials to hear their new proposals on a halt to its nuclear enrichment activities. The three European Union states are proposing that Tehran halt its controversial work on the nuclear fuel cycle in exchange for possible diplomatic and trade incentives.

But Hossein Mussavian, a senior official in charge of the nuclear file, said Tehran refused to give up on producing its own enriched uranium for civilian use despite the international pressure. "We must be able to produce some of our fuel in Iran itself but that does not mean we are turning down fuel offered by the European countries or even the United States," he said.

"The European and G8 countries are saying that the production of nuclear fuel in Iran itself is not economical for us. We reject that argument," said the official. "We will be obliged to buy some of our fuel from abroad but the production in Iran of fuel is much more economical," he added.

Earlier warning unheeded

The foreign ministers of Britain and Germany issued a joint warning to Iran on Tuesday to address concerns raised by the International Atomic Energy Agency (IAEA) about its nuclear program. "Iran has yet to give us the confidence we need about its intentions," British Foreign Secretary Jack Straw said.

In September the IAEA called on Iran to "immediately" widen its suspension of uranium enrichment to include all related activities, which it has so far refused to do. Iran faces a November 25 deadline, after which it risks being referred to the UN Security Council for possible sanctions.

"We are in favor of having discussions with the Europeans. We have made our own proposals and await their response," Aghazadeh said.

Missile test increases concerns

On an another front which has raised concern abroad, Iran carried out a new test on Wednesday of its upgraded Shahab-3 ballistic missile, which it says has a range of at least 2,000 kilometers (about 1,200 miles), Defense Minister Ali Shamkhani said.

"A few minutes ago we carried out a new test of the Shahab-3 missile in the presence of observers," he said around 3 p.m. "We tested the range, the destructive capacity, the guidance system and its capacity to hit a defined target," he told the ISNA news agency.

"We invited all those who had doubts (over the missile) but there were no foreign observers," he said. "Some people had expressed doubts over the success of our (last) test (on Aug. 11) ... so we carried out a new test." He refused to specify the missile's range. "We do not reveal the range of our missiles," Shamkhani said.

Long range puts rivals in sights

Steady progress made by Iran on its ballistic missile program is a major cause for concern for the international community, already alarmed over the country's nuclear activities. The new test will add to the mounting fears, especially as the upgraded Shahab-3, which is supposedly based on a North Korean design, has an estimated range of 2,000 kilometers. Previous figures had put the missile's range at between 1,300 and 1,700 kilometers, already bringing arch-enemy Israel and US bases in the region well within range.