European powers are considering a proposal that offers Iran a light-water nuclear reactor, as part of a deal aimed at persuading Tehran to stop enriching uranium.
Diplomats say Britain, Germany and France are drafting the proposal as part of an incentives plan to be presented in London on Friday to officials from the five permanent U.N. Security Council members and Germany.
Under the deal, Russia would enrich uranium for Iran to ensure foreign oversight of the process. Refined uranium can power nuclear reactors or a nuclear bomb when refined to a high grade.
Experts say a light-water reactor is less likely to be misused for nuclear proliferation.
Iran has said it will reject any European deal that demands an end to what it calls its pursuit of peaceful nuclear technology.
News of the reactor proposal comes as the Europeans meet to consider incentives aimed at resolving the stand-off. EU foreign policy chief Javier Solana says an incentives package would be difficult for Iran to refuse - if what it really wants is energy.
Western powers suspect Iran is enriching uranium to make nuclear weapons - a charge Tehran denies.
Meanwhile, U.N. Secretary-General Kofi Annan said urgent action is needed to end the nuclear stand-offs with Iran and North Korea.
He also called for a resumption of the six-nation talks aimed at dismantling North Korea's nuclear program. The talks, which have been stalled since November, involve North and South Korea, the United States, China, Russia and Japan.
Some information for this report was provided by AFP, AP and Reuters.