By Paul Reynolds
World Affairs correspondent, BBC News website
Iran has so far outmanoeuvred Western countries in its determination to develop a nuclear fuel cycle.
Iran insists it wants civilian nuclear power, not weapons
A new confrontation is likely this week at a meeting of the UN's nuclear watchdog the International Atomic Energy Agency (IAEA) in Vienna.
A senior British official said the West was not seeking to stop Iran from having nuclear power.
"We believe the best way is to maintain an international consensus against Iran for it to suspend enrichment activities," he said.
"The EU3 [the UK, France and Germany] are of the view that the IAEA board should report Iran to the Security Council. Our view is that the council task is to add weight to the process already under way in Vienna."
But whether Iran will find itself in the dock at the Security Council for having broken IAEA rules is by no means clear, as the history of this issue indicates.
And even if it is, it would probably not face sanctions at this stage.
After being caught red-handed developing the technology in secret for nearly 20 years, Iran managed to avoid being reported immediately to the Security Council by regularising its position with the IAEA and opening talks with Britain, France and Germany.
The EU3 hoped to persuade Iran to give up its fuel cycle ambitions and accept, as many countries do, that it should get nuclear fuel from abroad.
Mr Ahmadinejad insists Iran has a right to make nuclear fuel
This attempt has all but failed. The talks stopped this summer when Iran restarted work on the early stages of enrichment.
Iran's ambitions are now openly declared, as they were forcefully by its President Mahmoud Ahmadinejad in a speech to the UN General Assembly on Saturday.
In the meantime the US, which had called for an immediate referral to the Security Council when Iran was found out in 2003, was held at bay.
The EU3 are now calling for referral at the IAEA governors' meeting this week. But not everybody is in favour.
Some member states, Russia for example, have indicated that since Iran is now co-operating with the IAEA, its claim that it has the right to develop a fuel cycle under the Nuclear non-Proliferation Treaty (NPT) could be correct.
In the view of these countries, what counts is that Iran should be under close inspection and should not be allowed to develop nuclear weapons, which it says it will not do anyway.
And referral to the Security Council would not be for sanctions at this stage.
Instead, the council would be asked to demand that Iran give up its fuel technology on the grounds that, having broken the rules once, it cannot be trusted. It would be given time to comply.
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
The EU3 are arguing that while Iran does have a right under Article 4 of the treaty to "develop research, production and use of nuclear energy for peaceful purposes without discrimination", it has lost that right because it has broken Article 2.
This says that non-nuclear states should "not to seek or receive any assistance in the manufacture of nuclear weapons or other nuclear explosive devices".
The EU states say Iran did seek secret assistance, specifically from the renegade Pakistani scientist AQ Khan, from whom it acquired the designs of centrifuges needed for uranium enrichment.
If the US and the EU3, supported by Australia and Japan, do not manage to get the issue taken to the Security Council, Iran will have won another round.
The time may come when the West might have to consider accepting that Iran does develop its fuel technology.
Western efforts might then have to be concentrated on making sure that it does not use the expertise for the making of a nuclear bomb.
The only alternative might be military action, but the Europeans are against that and so at the moment is the US. Even Israel says diplomacy must be the priority.
Iran has cleverly exploited the weak link in the NPT - the fact that a signatory state has the right to make fuel itself.
It is the weak link because if you can enrich uranium to the level needed for fuel, you can also go on to enrich further to the level needed for a bomb.