The European Union is urging Iran not to resume uranium processing, which western countries believe could help the Islamic Republic develop a nuclear bomb. The EU has told Iran that any such move could jeopardize the outcome of talks aimed at resolving a dispute over Iran's nuclear program.

Iran says that it plans to immediately resume the conversion of uranium ore, also known as yellowcake, into uranium hexafluoride gas at its nuclear facility in Isfahan. It also informed the International Atomic Energy Agency that it is removing IAEA seals at the plant so as to restart such activity.

The gas can later be fed into centrifuges and enriched to be used as fuel in nuclear plants or, if highly enriched, in nuclear weapons. But Iran says it will keep its freeze on enrichment.

Iranian Foreign Ministry Spokesman Hamid Reza Asefi told a news briefing in Teheran that his government is resuming uranium processing because the EU failed to meet a deadline Sunday to present new proposals. But Mr. Asefi says Iran does not want to interrupt its negotiations with the EU

"We shall restart some nuclear activity, but we are ready to continue discussing other issues with the Europeans," he said.

The EU denies that it agreed to a Sunday deadline to produce new proposals, and says it will offer a package of economic incentives intended to persuade Iran to end its nuclear activities later this week. German Foreign Minister Joschka Fischer told reporters in Berlin that the EU, too, wants to continue negotiations.

"We want to keep talking, and we'll submit a proposal," he said. "I just hope Iran hasn't miscalculated."

France and Britain, which, along with Germany, are conducting the negotiations with Iran, also reacted negatively to Iran's decision to resume uranium conversion.

France said it is surprised and worried by Iran's move. Britain urged Iran not to take any unilateral steps that would contravene an agreement last November with the European Union, whereby Iran suspended its nuclear programs.

Iran maintains that, as a signatory to the Nuclear Non-Proliferation Treaty, it has a sovereign right to produce enriched uranium for peaceful purposes. But the United States says Iran's intention is to build nuclear weapons.

The Europeans are trying to work out a deal whereby Iran would permanently end enrichment activities in exchange for security assurances, economic cooperation and a guaranteed fuel supply.

But the Europeans have also warned Iran that they will ask the IAEA to refer Iran to the United Nations Security Council for possible sanctions, if it resumes uranium enrichment.