The IAEA is set to hold its final day of talks on 11 August to agree on what action to take. The UN nuclear watchdog will discuss the resolution, which expresses 'serious concern' over Iran's resumption of uranium processing activities and raises doubts over the country's transparency about its nuclear capabilities. 'Outstanding issues relating to Iran's nuclear programme have yet to be resolved... the agency is not yet in a position to conclude that there are no undeclared nuclear materials or activities in Iran,' the Associated Press quotes the draft as saying. The resolution calls upon IAEA director Mohammed el-Baradei to provide the agency's 35-nation board of governors with a report on Tehran's compliance by 3 September.

Tehran first resumed its uranium processing activities on 8 August, offering to export uranium hexafluoride gas produced at Isfahan in an effort to reassure the EU and Washington that it would not be enriched into weapons-grade material. However two days later, Gholamreza Aghazadeh, the head of Iran's nuclear agency, said all work at Isfahan would restart. 'The rest of the seals will be removed today and the activities will resume.'

The Iranian decision has sparked a flurry of diplomatic activity among the 35 nations on the IAEA board on how to proceed with Tehran. Pretoria proposed a compromise on 10 August to help defuse the crisis and allay fears that Iran could use its plants to develop nuclear weapons. The initiative proposes shipping South African uranium yellowcake to Iran for conversion into uranium hexafluoride gas. This would then be returned to South Africa to be enriched into nuclear fuel. However, analysts believe the plan is unlikely to succeed as the US and the EU have hardened their positions following Tehran's decision to resume all nuclear activity.

It had been hoped that the EU package, proposed to Tehran on 5 August, would persuade the country to abandon uranium enrichment activities. The list of economic, political and technical proposals included access to the international nuclear fuel market and atomic energy co-operation for civilian purposes. 'As Iran will have an assured supply of fuel over the coming years, it will be able to [make] a binding commitment not to pursue [nuclear] fuel cycle activities other than the construction and operation of light water power and research reactors,' a summary of the proposals said.

Both the EU and Tehran have been in prolonged negotiations over Iran's nuclear programme, which the Europeans and Washington suspect will be used to make atomic weapons. US President Bush said on 10 August that he was 'deeply suspicious' of Tehran's stated intention to continue negotiations with the EU over its nuclear programme. '[Tehran has] in the past said they would adhere to international norms and then were caught enriching uranium. And that's dangerous,' he said.