European leaders last night struck a compromise deal with Russia and China, edging closer to hauling Iran before the UN Security Council over its suspect nuclear programme.

At a meeting in London the five permanent members of the UN Security Council - the UK, Britain, France, Russia and China, plus representatives from the US and Germany - agreed to report Iran to an emergency meeting of the International Atomic Energy Authority (IAEA) in Vienna on Thursday.

The decision followed talks which lasted into the night and is reportedly the strongest action on which all five veto-holders could agree. It is a crucial step on the drawn-out path towards possible sanctions.

The E3 of the UK, France and Germany, whose two years of diplomatic efforts were dealt a blow this month when Tehran broke UN seals at its enrichment plant at Natanz, said that the proposal would send a clear message to the Islamic republic.

But Ali Larijani, Iran’s top nuclear negotiator, responded today with the threat that Iran will resume suspended nuclear activities and bar surprise UN inspections of facilities if it is referred to the UN Security Council.

Mr Larijani stopped short of specifying that Iran will restart its uranium enrichment programme, which has been suspended for nearly two years. A resumption of enrichment would dramatically escalate Tehran’s confrontation with the West.

"In case of referral ..., we have to start all nuclear work that has been voluntarily suspended and stop implementation of the Additional Protocol," he told reporters. Under the protocols, Iran agreed to allow IAEA inspectors to carry out surprise inspections of its nuclear sites with as little as two hours notice.

Gholamreza Aghazadeh, the head of Iran’s Atomic Energy Organisation, said that Tehran would not bow to Western pressure to halt nuclear research.

Javad Vaeedi, deputy head of Iran’s Supreme National Security Council, reinforced the message that Iran had no intention of backing down. "Research and development is the Iranian nation’s legitimate right and is irreversible," he told state television.

China and Russia, two permanent members of the UN Security Council with close energy ties to Iran, have argued against the imposition of sanctions and insisted instead on the need for patience and further negotiations.

Jack Straw, the Foreign Secretary, said today that the members shared serious concerns about Iran’s nuclear programme, which it insists is purely to produce energy.

The ministers recommended that the Security Council should wait until March to decide what form of action to take against Iran, when a formal IAEA report on Tehran’s activities is due.

In a statement, Mr Straw said that the foreign ministers had underlined their commitment to the Nuclear Non-Proliferation Treaty (NPT) and their determination to prevent the proliferation of nuclear weapons.

He said that they all shared serious concerns about Iran’s nuclear programme and agreed that an extensive period of confidence-building was required from Iran. The council members called on Iran to restore in full the suspension of enrichment-related activity, including research work.

They also agreed that this week’s IAEA board meeting should report to the Security Council on the steps required from Iran, although they resolved to continue to push for a diplomatic solution.

Iran has given warning that if it is formally reported to the IAEA it will refuse to co-operate any further with international inspectors and will move from mere research to full-scale uranium enrichment.

President Mahmoud Ahmadinejad has threatened to withhold Iranian oil if trade sanctions are levied against the nation.

Fathi Hamed Ben Shatwan, the Libyan oil minister who was meeting counterparts from Opec today, said that if Iran is referred to the UN it would cause a surge in oil prices.

"Everybody frightened that something will happen. We’re going to meet and watch the market," he said.

Even if they should eventually come, any sanctions they are likely to take weak forms such as travel bans and freezes on Iranian assets abroad, rather than comprehensive economic sanctions.

Israel and America are keen to take firmer action. The US has said that although military action is a distant prospect it has not been ruled out.

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