Iran stepped up its confrontation with the West over its nuclear program, restarting work at a uranium (search) conversion facility Monday in a move the United States and Europe have warned will prompt them to seek U.N. sanctions.

The resumption strikes a blow at European efforts to persuade Iran to rein in a program that Washington says is intended to develop nuclear weapons. Over the weekend, Iran, which says it aims only to produce electricity, rejected European proposals for economic incentives in return for limiting its nuclear activities.

The U.N. nuclear watchdog, the International Atomic Energy Agency (search), will hold an emergency meeting of its 35-member board of governors Tuesday to discuss the standoff with Iran.

Critics of Tehran question why Iran, which has vast reserves of petroleum, would need nuclear energy. Iran has responded by pointing out that it was Washington which first urged it to pursue a nuclear energy program while the pro-U.S. shah was in power.

France, Germany, Britain and the United States are likely to push for Iran to be referred to the U.N. Security Council (search), where they could seek new economic sanctions. But sanctions are far from a sure thing: Russia, which has helped Iran build its first nuclear reactor, and China, which has been strengthening ties with Tehran, hold veto power in the council.

"I think Iran should really bear in mind that this step is a step in the wrong direction," German Foreign Minister Joschka Fischer said, according to ZDF television. But he suggested negotiations could continue, saying: "We are trying to prevent a negative trend with fatal consequences."

U.S. State Department spokesman Adam Ereli accused Iran of "thumbing its nose at a productive approach."

French Foreign Minister Philippe Douste-Blazy urged Tehran to reconsider, saying it wasn't too late to turn back. "I call on Iran one more time, tonight, to listen to the voice of reason," he said.

Tehran suspended its nuclear activities in November to avoid sanctions and as a gesture in the negotiations with Europe. But it has expressed frustration with the talks and has been threatening for weeks to resume part of the program — work done at the Uranium Conversion Facility outside the city of Isfahan.

On Sunday, Iran brushed off the sanctions threat.

"We are not concerned and are ready for everything," Foreign Ministry spokesman Hamid Reza Asefi said. He called the threats "not effective. What interests us is cooperation. We advise Europe to withdraw its threats."

On Monday, work at Isfahan resume, after IAEA inspectors installed cameras and other surveillance equipment intended to ensure no nuclear material is diverted. Iranian technicians in white suits and surgical masks rolled out barrels of yellowcake — raw uranium — to begin the conversion process.

The facility covers over 150 acres spread along mountains outside the city. Parts of the facility were built in tunnels in the mountains as protection from airstrikes. It is also surrounded by radar stations and anti-aircraft batteries.

Iran learned a lesson from the 1981 Israeli airstrike against Iraq's main nuclear reactor. Iran has spread its facilities over several locations, each with underground installations. The Isfahan facility and the uranium enrichment plant in Natanz house the heart of the country's nuclear program.

The Isfahan Conversion Facility, 255 miles south of Tehran, carries out an early stage of the cycle for developing nuclear fuel, turning yellowcake into UF-6 gas, the feedstock for enrichment.

In the next stage of the process — which Iran has said it will not resume for the time being — the gas is fed in centrifuges for enrichment. Uranium enriched to a low level is used to produce nuclear fuel; further enrichment makes it suitable for use in an atomic bomb.

Mohammad Saeedi, deputy head of the Atomic Energy Organization of Iran, said work was resuming "stage by stage" at Isfahan, starting with the unit that makes ammonium uranyl carbonate, or AUC, a component in the conversion process.

The plant will soon start turning yellowcake into UF-4, a preliminary stage before UF-6, the state news agency reported.

The AUC unit had not been sealed by the U.N. watchdog agency. Within the next two days, IAEA inspectors will remove seals that were put in place on the unit where UF-4 is turned into UF-6, bringing the facility into full operation, Saeedi said.

The seals are voluntary, and the IAEA has no choice but to remove them when Iran asks. Tehran says it is abiding by IAEA inspections of its sites, and allowed installation of surveillance equipment.

Iran has insisted it has the right under the Nuclear Nonproliferation Treaty to carry out the entire fuel cycle — from raw uranium to fuel for a reactor. Europe fears that if Iran can develop fuel on its own, it will secretly produce material for a bomb.

IAEA chief Mohamed ElBaradei said work had resumed as Isfahan before the surveillance equipment was tested, "which normally takes 24 hours," ElBaradei's spokesman Mark Gwozdecky said in Vienna.

Earlier, Iran converted some 37 tons of yellowcake into UF-4. Experts say that amount could yield 200 pounds of weapons-grade uranium, enough to make five crude nuclear weapons.

Saeedi said Iran is willing to wait on starting uranium enrichment until a deal is reached with Europe. "We won't restart work in Natanz for now," he said. "We hope we will reach a logical conclusion in talks with Europeans."

An exiled opposition group, the National Council of Resistance of Iran, accused Tehran of exploiting talks with the Europeans in a "cat and mouse game" to stall for time while covertly developing a nuclear weapons program.