The United States said Monday it shares European concerns over Iran's resumption of work at a uranium conversion plant. But U.S. officials say they're not ready to declare European nuclear diplomacy with Iran an outright failure.

Officials here say the Bush administration is being deliberately low-key with its reaction to the Iranian nuclear developments, still hoping that European efforts to dissuade Iran from producing weapons-grade materials can succeed.

Iran announced Saturday it was rejecting a European incentive package aimed at getting it to abandon nuclear fuel-cycle activities, and on Monday it resumed low-level uranium conversion at its Isfahan nuclear plant.

Adam Ereli

While French Foreign Minister Philippe Douste-Blazy said the Iranian action had created a "grave crisis," Deputy State Department Spokesman Adam Ereli was more reserved.

He said Iran's return to uranium conversion was obviously a violation of the Paris agreement it reached with the so-called E.U.-Three, Britain, France and Germany last November, and something the United States did not want to see.

Mr. Ereli said Iran was "thumbing its nose" at the "productive approach" of the E.U.-Three but suggested the diplomatic process might still be put back on track:

"The important thing to remember in all of this is that the EU-Three provided Iran with a very good proposal for dealing with this problem. We supported, we support, that proposal. We were hopeful that they would be able have talks in August," Mr. Ereli says. "It appears Iran has rejected that proposal, and we will be working with, we will continue to work with, the EU-Three in support of efforts to get this process back on track."

The Europeans offered Iran a package of trade, technology and security incentives to abandon nuclear fuel cycle work that the United States contends is part of a covert nuclear weapons effort.

A senior diplomat who spoke to reporters here said administration officials would clearly have preferred that Iran had refrained from reopening the Isfahan facility and continued the talks with the Europeans.

But he said U.S. officials still believe Iran can be "walked back" from the actions it has taken since last week, and that the United States does not believe that "raising the rhetoric and temperature" now would be conducive to that.

Spokesman Ereli said the U.S. officials will closely consult with European colleagues in advance of Tuesday's Vienna meeting of the governing board of the International Atomic Energy Agency, which will take up the Iranian issue.

The United States and EU-Three countries have raised the prospect of having the 35-nation IAEA board refer the matter to the U.N. Security Council for possible sanctions if diplomacy with Iran failed.

Iran denies having a nuclear weapons program and insists it is legally entitled to develop a full nuclear fuel cycle for civilian power reactors.