Taking the matter to the Security Council would be "playing with fire", Hassan Rowhani (photo), whose country is the second largest oil producer in OPEC, told reporters. "The first to suffer will be Europe and the United States themselves, this would cause problems for the regional energy market, for the European economy and even more so for the United States," Rowhani said at a conference in Tehran on nuclear technology and sustainable development.

EU members Britain, France and Germany are trying to convince Iran to dismantle nuclear fuel work -- which the United States says is part of a covert atomic weapons development -- in return for economic and political rewards.

Tehran has argued that it wants to enrich uranium to generate atomic energy for purely civilian use, and argues such work is authorized by the nuclear Non-Proliferation Treaty (NPT). The United States says the country is "cynically" manipulating a loophole in the NPT, and has threatened to take the matter to the Security Council to seek international sanctions.

If Washington brings the issue before the Security Council, "Iran will retract all the decisions it has made and the confidence-building measures it has taken," Rowhani said. He added that Iran's leaders "could be called upon to make new decisions", but did not provide any details on what that would involve. "The stability in the region would become fragile and the United States would be the first to suffer," he said.

EU tries carrot and stick approach

The EU is seeking a permanent halt to uranium enrichment, a process which can provide both nuclear fuel for civilian power plants and be used in the making of nuclear bombs. In return for a permanent halt, the EU is offering Iran a package of incentives covering trade, security and technology.

But while Iran agreed in November to suspend enrichment, it would not agree to a permanent halt, Rowhani, who visited the German and French capitals for talks on the issue at the end of February, said Saturday.

"We cannot have and we will not have negotiations with the Europeans if what they want is an end" to uranium enrichment. "We will not continue the talks for one single minute, we have made it very clear to Paris and Berlin," he said.

During those visits, Rowhani told officials that Iran had five "other formulas to ease concerns" while still allowing Tehran to continue uranium enrichment. "I hope we will reach an agreement on these formulas because time is short," he said.

"If US pressure doesn't prevent it, I think we will manage to reach an agreement with the Europeans because they don't want to deprive the Iranian people of their right and will try to act fairly," Rowhani said.

The European countries hope the US would lend its support to any deal by lifting its veto on Iran's World Trade Organization (WTO) membership among other things. Rowhani dismissed however such incentives as being of "little significance".

Iran: Work on reactor will go on

Meanwhile, Rowhani insisted that the controversial construction of a heavy water reactor in Iran was only for research purposes and would not be used to produce plutonium for a nuclear bomb.

"The goal is research, it's a peaceful goal," he said, adding: "We are not seeking to produce plutonium for military use." He said the construction would be completed by 2008.

The IAEA last year asked Iran to refrain from building the reactor amid concerns about the proliferation risk, as the reactor could produce 8-10 kilograms of plutonium per year, enough to make at least one nuclear bomb annually.

Iran has rejected an offer from the European Union to help it get a light-water research reactor in exchange for giving up its heavy-water project.