"We would support the acquisition by Iran of a light water research reactor," said the seven-page document presented by Britain, France and Germany to the G8 group of industrialised nations last week in Washington before a meeting of the Euro-3 with Iran in Vienna on Thursday.
The meeting is to give Tehran a last chance to come clean and agree to suspend all activities related to uranium enrichment before UN nuclear watchdog the International Atomic Energy Agency (IAEA) decides on 25 November whether Iran is cooperating with it or not.
The US wants the IAEA - which since February 2003 has been investigating Tehran on US charges that the Islamic republic has a covert nuclear weapons programme - to send it to the UN Security Council, which could impose sanctions.
But the Euro-3 group has opposed this, favouring instead a policy of "constructive engagement" to get Tehran to cooperate.
The three countries reached an agreement with Iran in October 2003 to suspend uranium enrichment, but this did not include support activities such as building centrifuges and making the feed gas for the enrichment process.
Last chance offer
A Western diplomat said the Euro-3 had told the US the document would be "used as the basis to make the [last-chance] offer to Iran", although it was not the final text.
The document said there was only "a short period of time to secure a comprehensive and acceptable understanding from Iran".
The US wants the IAEA to take
Iran to the UN Security Council
The US does not endorse the Euro-3 approach, but is watching the initiative to see how it turns out and will then reconvene the G8 nations, the diplomat said.
The G8 consists of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
"We intend to put to the Iranians an approach containing the immediate decisions we require from them on suspension and draft elements for a long-term agreement which we could start to negotiate as soon as the IAEA verifies that the suspension is in place," the Euro-3 paper said.
"The suspension will be indefinite, until we reach an acceptable long-term agreement," it added.
Carrot and stick
It said if Iran failed to suspend all uranium enrichment
activities, the Euro-3 would join the US in calling for Tehran to be taken to the UN Security Council.
Uranium enrichment can be used to make fuel for civilian reactors but also the explosive core of atomic weapons.
Iran is also working on building a heavy water reactor, which can make plutonium ideal for nuclear weapons. A light water reactor makes a safer form of plutonium, experts say.
If Iran cooperates, the Euro-3 would be ready to promise a whole range of measures, including access to nuclear fuel for its civilian reactors and recognising Iran's right "to develop a nuclear power generation programme to reduce its dependence on oil and gas".