TEHRAN, Feb 13: Iran on Sunday rejected a European offer aimed at limiting its nuclear fuel activities and warned the United States against "playing with fire" in an increasingly bellicose stand off between Tehran and the international community.

Foreign ministry spokesman Hamid Reza Asefi insisted that Iran would not give up construction of a heavy-water reactor, which can be used to make nuclear weapons material, in exchange for a light-water reactor offered by the Europeans.

"We welcome such proposals but we will not under any circumstances replace our heavy-water research reactor," Mr Asefi said at a press conference. "We will continue working on our heavy-water reactor," under construction at Arak south west of Tehran.

"We have told the Europeans to tell their American allies not to play with fire and the Europeans received that message perfectly well," he said. Britain, France and Germany are trying to convince Iran to dismantle an enrichment programme the United States says is part of a covert atomic weapons development, in return for economic and political rewards.

Diplomats said EU negotiators have offered to send a mission to help Tehran obtain a light-water research reactor in what would be the first concrete move towards rewarding it for abandoning uranium enrichment.

But Tehran's stance on the Arak reactor is likely to complicate the European task amid an escalating war of words between Iran and the United States over Iran's nuclear activities. The Europeans say they cannot understand why Iran would want a plutonium-producing heavy water reactor when its whole enrichment programme is based on uranium.

Iran insists its nuclear programme is purely for civilian energy needs, but the United States - less than two years on from its invasion of Iraq in March 2003 - has hinted at the possible use of military force.

However Mr Asefi declared: "We don't take Rice's threats seriously," referring to new US Secretary of State Condoleezza Rice who last week urged European negotiators to take a tough line with Iran and warned Tehran of sanctions if it refuses to renounce its suspected nuclear weapons programme.

"Rice and US officials know well Iran's capabilities (of responding)," he added. The Washington Post reported on Sunday that the United States has been flying drones over Iran since April 2004, seeking evidence of nuclear weapons programmes and probing for weaknesses in Iran's air defences.

The revelation came after the US National Intelligence Council launched a broad review of its classified data on Iran to assess its alleged weapons drive and its impact on regional and global security.

The US intelligence community has not produced a formal estimate on Iran since 2001, and analysts said the focus likely reflected new strategic priorities for the administration of President George W. Bush, who has accused Iran of "pursuing nuclear weapons while depriving its people of the freedom they seek and deserve."

Tehran insists its talks with the so-called EU3 which began in mid-December, must have concrete results within three months if they are to continue. But Iran's top nuclear negotiator, Hassan Rowhani, has acknowledged that if Tehran is referred to the UN Security Council, as demanded by the United States, Tehran cannot bank on avoiding sanctions.

"If Iran does not reach an agreement with the Europeans on the nuclear issue, Iran's case will be referred to the Security Council, where it is unlikely one of the permanent members would use their veto in favour of Iran."

Iran has formed important economic and political relations with Moscow and Beijing, with the Russians developing a nuclear power plant at Bushehr in southern Iran.

Meanwhile, German Foreign Minister Joschka Fischer warned on Sunday that Iran would be referred to the UN Security Council if it resumed nuclear enrichment which could be used for weapons.

"If Iran behaves in an unreasonable way, if for example it restarts enrichment... then that would lead to the Security Council," Fischer told an international security conference in the German city of Munich. -AFP