TEHRAN, March 5: Iran said on Saturday it would return to making nuclear fuel and that the Middle East would become even more unstable if it was sent to the UN Security Council over its atomic programme.

Officials in Washington said on Friday they were still looking to haul Iran before the council for possible sanctions, but have not yet been assured of EU backing for this move should European attempts to broker an atomic deal fail.

"If the Americans succeed in referring Iran's case to the Security Council, Iran will immediately suspend all its voluntary confidence-building measures," Iran's chief nuclear negotiator Hassan Rowhani told a conference.

Iran agreed last year to suspend making nuclear fuel for a few months while it held talks with Britain, France and Germany. The EU states are encouraging Iran to drop its fuel programme in return for economic incentives. "Parliamentarians may even come up with a harder decision," Rowhani added.

Many conservative parliamentarians have called for Iran to pull out of the nuclear Non-Proliferation Treaty (NPT).

In the shorter term they have threatened that Iran will not ratify the Additional Protocol to the NPT, which permits snap U.N. inspections of nuclear sites.

REGIONAL INSTABILITY: "The security and stability of the region would become a problem," said the mid-ranking cleric who is secretary-general of Iran's National Security Council. "This would be a particular problem for the United States because it has a lot of troops and equipment in region and is in fact our imposed neighbour." But Rowhani still held out hope that talks with Europeans could pay dividends, saying Iran had given the Europeans "an objective guarantEe" that it was not seeking arms.

HEAVY WATER FACTORY: Iran has completed a heavy water production plant built to supply a nuclear research reactor which could make plutonium for atom bombs, a think tank said late on Friday.

Providing satellite photos to back up its assertion, the Institute for Science and International Security, also quoted Hassan Rowhani saying on Feb 7: "We may be able to produce heavy water soon, within the next few weeks."-Reuters/AFP