Several diplomats from the European Union's Big Three - France, Britain and Germany - said on Thursday they had dropped the demand in the interest of getting a unanimous resolution approved by the International Atomic Energy Agency (IAEA) board of governors, which is meeting this week.
Iran's official Irna news agency also confirmed this, citing Germany's ambassador to the IAEA, Herbert Honsowitz, as saying: "The EU has withdrawn its request to send Iran's case to the Security Council."
The EU earlier in the week had been calling overtly for Iran's immediate referral to the council over nuclear activities the US claims hide weapons work.
Fear of retaliation
But at a meeting in Vienna this week of the UN watchdog International Atomic Energy Agency's 35-nation board of governors, Russia, China and non-aligned nations rejected hauling Iran before the UN, citing fears trade sanctions against the Islamic Republic could draw sharp retaliation from the oil giant.
The draft resolution "requests" IAEA Director-General Mohamed ElBaradei to report on Iran's nuclear program "to the IAEA board (of governors) which will address the timing and content" in its own report on Tehran that could be given to the Security Council, although the Council's name is not mentioned.
Stiff Russian opposition was said
to be behind the climbdown
The previous draft circulated on Monday by the EU had called for a report "to the Security Council".
The new draft does however specifically find Iran in non-compliance with international safeguards mandated under the nuclear Non-Proliferation Treaty (NPT).
A Western diplomat said the climbdown in calling this week for Iran to be taken to the Security Council was due to Russia's stiff opposition to the move.
"The Russians are the reason," the diplomat said, adding that the hope was that delaying referral "gets them on board".
However, it was unclear if the new draft resolution would be accepted by Russians and the non-aligned nations, as the IAEA board of governors continued its meeting on Thursday.
"The EU has withdrawn its request to send Iran's case to the Security Council"
Germany's Ambassador to the IAEA
Another diplomat said the delay was "frustrating" as EU negotiators Britain, France and Germany had written a strong resolution and were determined earlier in the week to get a consensus on referral.
Failing that, they were determined to call for a vote on referral, which they believed the West had enough votes to win.
But diplomats said there was concern that a lack of consensus could diminish the message they were trying to deliver to Iran, which rejected a trade deal with the EU and restarted last month sensitive nuclear fuel work, triggering a new crisis.