VIENNA (Reuters) - Iran has resumed some uranium enrichment work, geared to making fuel for nuclear reactors or bombs, in defiance of a vote to engage the U.N. Security Council in efforts to rein in Tehran's atomic ambitions, diplomats said.

Iran said earlier on Monday that it would resume enrichment, voluntarily suspended for two years while it held talks with European Union powers which collapsed last month, by early March but gave no date.

Tehran also announced it had put off talks on a Russian proposal to avert a Security Council showdown by enriching Iranian uranium on its soil, ensuring none was diverted for other purposes. Moscow said it was prepared to go ahead with the talks on Thursday as planned.

Diplomats in missions dealing with the U.N. nuclear watchdog agency in Vienna told Reuters Iran had resumed some uranium purification activity at its Natanz plant late on Sunday.

If confirmed, the move would signal Iran's determination to press ahead with its nuclear project despite a February 4 vote by the International Atomic Energy Agency to report Tehran to the Security Council, which could consider sanctions.

Iran retaliated for the decision by the 35-nation IAEA board of governors by halting short-notice IAEA inspections, a crucial tool in assessing whether Iran's nuclear program is wholly peaceful, and vowing to enrich uranium once again.

The West fears that the Islamic Republic, which hid its nuclear black-market purchases and enrichment work from the IAEA for almost 20 years and has called for Israel's destruction, is secretly trying to build atomic bombs.

Tehran denies this, saying it seeks only atomic energy for an expanding economy. Its leaders suggest they are confident Western efforts to curb Iran's nuclear project will run out of steam given international dependence on Iranian oil exports.

"Indications that they have resumed enrichment would explain why they've stalled the Russia talks," said an EU diplomat who like others spoke on condition of anonymity.

U.N. Secretary-General Kofi Annan, speaking at the White House after talks with President George W. Bush, said of the standoff with Iran "We need to be able to resolve it, and I hope there will be no steps taken to escalate the situation."


Last month, Iran broke IAEA seals on mothballed equipment at its Natanz pilot fuel-purification plant and began renovations, spurring the EU to freeze flagging talks with Tehran and sponsor a resolution at the IAEA to notify the Security Council.

The enrichment process involves feeding uranium UF6 gas into cascades of centrifuges, cylindrical machines that purify the material by spinning at supersonic speeds.

If purified to levels of about 5 percent, uranium can fuel nuclear reactors. Enriched to about 90 percent, a longer and more difficult undertaking, it would be able to trigger the chain reaction for nuclear explosions.

Greenpeace nuclear analyst William Peden said Iranian efforts to purify uranium at this stage would involve testing only a few centrifuges, far from the hundreds needed to produce fuel for atomic warheads.

Diplomats and nuclear experts estimate Iran would need between two and more than 10 years to perfect technology needed to create a nuclear arsenal, if indeed it wants one.

Iranian President Mahmoud Ahmadinejad blamed the United States for international tensions with his country.

"They choose to threaten us and make false allegations and they want to impose their lifestyle on others and this is not acceptable," he was quoted as saying by USA Today newspaper.

"The way they have treated our people here has left no ground for talks," he said. "... They think they can solve everything with a bomb. The time for such things is long over."

In Tehran, government spokesman Gholamhossein Elham said February 16 talks with Russia to weigh proposals to process nuclear fuel for Iranian reactors on Russian soil had been postponed.

The proposal was acceptable only if it supplemented enrichment facilities in Iran, Elham told a news conference.

In Washington, White House spokesman Scott McClellan said Iran was thumbing its nose at the world on its nuclear program and further isolating itself from the international community.

"The regime in Iran knows what it needs to do," he told reporters, referring to calls in the February 4 IAEA resolution to freeze nuclear fuel development work again and give full answers to agency questions about its nuclear work.

The United States and Israel have mooted military strikes on Iran as a last resort if diplomatic pressure failed.

But a British think-tank suggested in a study released on Monday that military action would backfire because hundreds of civilians would be killed, Islamic militant attacks on Western targets would multiply, and world oil prices would jump.