Iran has warned it would be a "grave miscalculation" for the US and EU to refer Tehran to the UN Security Council over its nuclear programme.
Iran says its nuclear programme is for purely peaceful purposes
The warning came after Iran broke UN seals at its nuclear plant at Isfahan, making it fully operational.
UN Secretary General Kofi Annan has called on European Union countries to continue dialogue with Iran.
EU countries have proposed a resolution to the UN nuclear watchdog in Vienna calling for Iran to halt work.
But Iran's chief negotiator at the talks there said Tehran had an absolute right to produce nuclear fuel.
Cyrus Nasseri told the BBC's Newsnight programme that talks with the EU to continue a suspension of its uranium conversion work had broken down.
Dismissing the EU's proposals of economic and political concessions as a "package of lollipops", Mr Nasseri said: "We do not for the moment have much hope in the talks whether now or in the future."
The BBC's Emma Jane Kirby in Vienna says the US and Britain are now calling for tough action against Iran.
NUCLEAR FUEL CYCLE
Mined uranium ore is purified and reconstituted into solid form known as yellowcake
Yellowcake is converted into a gas by heating it to about 64C (147F)
Gas is fed through centrifuges, where its isotopes separate and process is repeated until uranium is enriched
Low-level enriched uranium is used for nuclear fuel
Highly enriched uranium can be used in nuclear weapons
She says that although Iran has not broken international law by resuming conversion work, the West believes it has certainly broken the spirit of the Vienna talks.
Matthew Boland, spokesman of the US Mission to the UN in Vienna, said: "Today's breaking of seals is yet another sign of Iran's disregard of international concerns."
Mr Nasseri rejected the criticism. "It is absolutely wrong to consider that only a few states in the world, the US and a few states in Europe, plus Russia, should have the exclusivity producing fuel."
The breaking of the seals at Isfahan took place under the supervision of the IAEA, which has installed equipment to monitor activity.
The resolution the EU drafted in response is scheduled to be heard at a meeting of the IAEA's 35-nation board in Vienna on Thursday.
It is thought the resolution does not yet call for Iran's actions to be referred to the UN Security Council.
Mr Nasseri said: "I think that would be a grave miscalculation by the US and particularly by Europe to move towards the path of confrontation.
"There is no legal base whatsoever to go to the Security Council. If it is, it is by political choosing and it will be big, big mistake."
The EU and US suspect Iran's scheme is a cover for a nuclear weapons programme.
The West could call for sanctions on the grounds that Iran hid its uranium enrichment programme for 18 years.
Mr Nasseri admitted Iran had been "a bit cautious on our transparency... otherwise [our programme] would have been devastated by the intrusive actions of the Americans".
The Isfahan plant is Iran's main uranium conversion facility.
Conversion is an early stage in the nuclear fuel cycle, turning raw uranium - known as yellowcake - into the feedstock for enriched uranium.
Uranium enriched to a low level is used to produce nuclear fuel, while further enrichment makes it suitable for use in atomic weapons.