EU threatens to slap sanctions on Iran

"The Iranians were told that if there's no deal by Monday, they (the EU) would no longer block a referral to the UN Security Council when the (UN nuclear watchdog) reconvenes," a Western diplomat told Reuters. The Security Council has the power to impose economic sanctions.

But the diplomats said neither the EU trio nor Iran wanted the talks to collapse. They said it would be a big humiliation for the Europeans and could escalate the standoff over Tehran's nuclear plans into an international crisis.

The United States, which has been pressing for Iran's case to be referred to the Security Council, accuses Tehran of wanting to build a nuclear bomb. Iran, though oil-rich, says its program is aimed solely at generating electricity.

Last week, Iran promised the EU it would halt all activities related to uranium enrichment -- a process that can create atomic fuel for power plants or weapons -- in return for an EU pledge to neutralise the threat of economic sanctions.

The ink on the hard-won accord was barely dry, however, when Tehran demanded an exemption for some 20 enrichment centrifuges for research. European diplomats said this was impossible and could only deepen suspicions Tehran had a secret arms programme.

On Friday, Western diplomats said Iranian negotiators had agreed to drop the demand, paving the way for a comprehensive deal with the EU on an International Atomic Energy Agency (IAEA) resolution that would make the voluntary freeze a binding commitment for Tehran.