They also decided the Security Council should wait until March to take up Iran's nuclear file after a formal report on Tehran's activities from the U.N. agency, which meets Thursday in Vienna.

"Reporting Iran's dossier to the U.N. Security Council will be unconstructive and the end of diplomacy," said Iran's leading nuclear negotiator, Ali Larijani. State television quoted him as sayiny Iran still believes the issue can be resolved peacefully.

Vice President Gholamreza Aghazadeh, who also runs Iran's Atomic Energy Organisation, said it was difficult to predict how the IAEA meeting on Thursday would develop, the semi-official Iranian Students News Agency reported.

"The biggest problem for the West is that they can't find any (legal) justification to refer Iran to the U.N. Security Council," ISNA quoted him as saying.

Larijani also reproached Europe for the London decision, which was taken at the home of British Foreign Secretary Jack Straw and attended by the foreign minister of Germany and the foreign policy chief of the European Union.

"Europeans should pay more attention. Iran has called for dialogue and is moving in the direction of reaching an agreement through peaceful means," Larijani said.

Hours earlier, British, French and German representatives had met Larijani's deputy, Javad Vaedi, in Brussels for last-ditch talks on the dispute, but failed to make any progress.

Last week, Larijani flew to Moscow and Beijing to seek Russian and Chinese support against the Western drive to refer Iran to the Security Council.

The decision by Russia and China to vote for referral surprised observers as the two nations have consistently counselled caution on Iran's nuclear file. Both have major economic ties with Iran.

A French government official, speaking on the customary condition of anonymity, said the Russian and Chinese ministers had been persuaded of the need to show a united front.

The United States accuses Iran of trying to build atomic weapons. Iran denies this, saying its nuclear program is only for generating electricity.

Iran broke IAEA seals at a uranium enrichment plant Jan. 10 and resumed small-scale enrichment. The decision provoked an outcry as enrichment is a process that can produce material for nuclear reactors or bombs. Britain, France and Germany, who had been negotiating with Iran, said they would press the IAEA to refer the matter to the Security Council.

If the IAEA votes to refer Iran to the Security Council on Thursday, Iran is likely to retaliate immediately.

Iran's parliament has approved a law requiring the government to stop all voluntary cooperation with IAEA in the event of referral. This would mean that Iran stops allowing IAEA inspectors to carry out intrusive searches of its facilities and the country resumes large-scale enrichment of uranium.

Iran insists it has the right as a signatory to the Nuclear Nonproliferation Treaty to build nuclear power stations and produce their fuel by enriching its own uranium.

But the United States and Europe do not trust that Iran would enrich uranium only for peaceful purposes because the country has concealed significant aspects of its nuclear program in the past.

While the IAEA has said it has found no evidence of Iran's building nuclear weapons, it has refused to give Iran a clean bill of health because of numerous unanswered questions over its atomic program.

U.S. light crude rose 11 cents to $68.46 a barrel by 11:00 a.m., after climbing 59 cents on Monday. London Brent crude slipped nine cents to $66.50.

The five permanent members of the U.N. Security Council agreed on Tuesday that the U.N.'s nuclear watchdog should report Iran to the council over its nuclear program when it meets in an emergency session on Thursday.

Any such action would spell the end of diplomatic efforts to resolve the issue, Iran's chief nuclear negotiator said.

Libya's oil minister said a referral of OPEC's second biggest producer to the council would have a "very big effect" on prices.

Traders have feared such a move could prompt Tehran to consider using its oil as a political weapon.

"It's a volatile situation," said Sam Tilley, head of research at UK brokerage Sucden Ltd. "Until we get a proper resolution on this, I don't see prices dropping."

Even as the dispute over Iran's atomic program escalated, its oil minister said on Tuesday the country had no plans to halt oil exports.

"We are not mixing oil with politics," Karem Vaziri said.

Concern about stability of supplies from Iran, combined with the impact of lost output from Nigeria and a fall in Russian energy exports have helped drive up oil prices more than a tenth so far this year.

NO NEED TO CUT

The standoff over Iran's nuclear program partly overshadowed an expected decision by OPEC ministers meeting in Vienna to keep oil output steady.

Although OPEC remains concerned over a seasonal dip in second quarter demand, Saudi Arabian Oil Minister Ali al-Naimi told reporters in Vienna that all OPEC ministers were in agreement to leave output unchanged at their Tuesday meeting.

"Since the price is high there is no need to cut," said Libyan Energy Minister Fathi Omar Bin Shatwan.

"(At) the next meeting, if there is a problem, maybe we will have to cut," he told reporters in Vienna on Tuesday.

Naimi said on Sunday he saw absolutely no reason for OPEC to cut output this year, pointing to economic growth in Asia as driving oil prices.

Japan, the world's third-largest oil consumer, imported nearly 8 percent more crude in December than a year earlier, while its kerosene sales were the highest in more than 50 years amid freezing weather, government data showed on Tuesday.

In Nigeria, oil production closed in by militant attacks should be restarted by the middle of February, Minister of State for Petroleum Edmund Daukora said on Tuesday.

Major producer Royal Dutch Shell has partially restarted output at its 115,000 barrel per day (bpd) EA field, but industry sources said it has no immediate plans to resume repairs on the damaged onshore pipeline that has cut the other 106,000 bpd of its production.

Nigerian militants have said they will continue with their attacks with an aim of reducing exports by 30 percent next month.

Statistics show that China's crude oil output increased from 165 million tons in 2000 to 183 million tons in 2005, and the output of natural gas rose from 27 billion cubic meters to 47.5 billion cubic meters.

New breakthroughs in oil and gas exploration were made in the past five years as the traditional oil fields in East China, such as Daqing, maintained a steady growth.

Oil fields capable of producing high yields were discovered in west China including Xinjiang Uygur Autonomous Region, Ningxia HuiAutonomous Region, and Qinghai, Gansu and Shaanxi provinces, and in offshore China's Bohai Bay.

Between 2000 and 2005, six large-scale natural gas zones were discovered in the Tarim, Ordos, Sichuan and Qaidam basins, in the South China Sea and in the East China Sea.

Petroleum and natural gas began to play bigger roles in China's energy consumption structure.

In 2000, 16.6 percent of China's energy demand was met by petroleum, in 2005 it was 22.7 percent. Consumption of natural gasrose from 2.1 percent in 2000 to 2.6 percent in 2005.

China strengthened infrastructure during this period to support the soaring oil and gas demand of the country.

The great pipeline carrying natural gas from China's energy-rich West to the energy-thirsty East was completed at the end of 2004.

By the end of the following year, China had built up a basic pipeline network for natural gas stretching 24,000 kilometers, with 20,000 kilometers for oil products.

Between 2000 and 2005, China amended relevant regulations for closer cooperation with foreign partners.

By the end of 2005, China had signed a total of more than 200 contracts with foreign petroleum partners, attracting foreign capital of over 9.3 billion U.S. dollars and boasting contracted acreage of over 1.05 million square kilometers.

Petrodollar Warfare discusses the crucial shift in US monetary policy during the 1970s away from the gold standard to becoming the monopoly currency for worldwide oil sales, effectively enabling the US to dominate world trade. It then analyses global Peak Oil as an additional driver of US foreign policy and the parallel growth of political fundamentalism in the current US administration. Tracking the emergence of the euro as an important challenger to dollar supremacy, the book pinpoints Hussein's November 2000 switch to selling oil for euros as the defining moment for Iraq and, perhaps - without an immediate change in governance - for the noble American experiment.

This warning should be taken seriously. The Jaish al Mahdi, al Sadr's militia, has emerged as a formidable force since its formation in 2003. Fifteen months ago, in November 2004, when it was less well trained and equipped than today, this army held off a determined assault by US Marines for three weeks in Najaf.

But Iranian interest and influence in Iran are by no means confined to the radical Shi'ite cleric and his fighters. SCIRI, the principal party in the dominant Shi'ite coalition that triumphed in the Iraqi elections, was after all originally founded and fostered in Iran. Its first leader was Ayatollah Mohammed Shahroodi, presently head of the Iranian judiciary. SCIRI's military arm, the Badr Army, fought on the Iranian side in the Iran-Iraq war, and was long regarded as the direct instrument of Iranian intelligence. Elsewhere, Iranian intelligence can look to such assets as Abu Mehdi al-Mohandis--"the engineer"--resident in Najaf with mentoring responsibilities for Sadr's militia there.

In the north, in and around the Kurdish enclave, credible sources attest that Iranian intelligence has been providing some measure of support to Sunni insurgents, including the militant Islamic Sunni group Ansar al Islam. Indeed, the dozen or so senior Iranian Revolutionary Guard (IRGC) commanders killed in a plane crash two weeks ago, possibly including Mohammed Sulaimani, the key Guards official involved in Iraqi affairs, were on their way to Oroumieh in north west Iran, the main base for Iranian operations in northern Iraq.

It may seem counter-intuitive for the Shi'ite Iranians to be supporting groups with a militantly anti-Shi'ite agenda, but this same regime sheltered the Afghan fundamentalist Sunni leader Gulbeddin Hekmatyar for many years, despite deep seated mutual antipathy.

Furthermore, power in Iran is diffused. Iraq is a huge prize, and control of this asset, so obligingly proffered to Iran by George Bush when he toppled Saddam Hussein, is inevitably a matter for contention among powerful factions inside the regime. Revolutionary Guards commanders may have a different agenda from that of the "Etalaat"--intelligence services, or the office of Supreme Leader Khamanei, let alone that of the elected President Amahdinejad. Among other imperatives, these various fiefdoms have financial interests at stake in Iraq. Many of the IRGC commanders, for example, are "Moawedun," meaning they are of Iranian descent but born in Iraq, who have property interests in Iraq.

Following the US invasion, the most influential voice in Iranian policy toward Iraq was that of President Hashemi Rafsanjani, who opted for limited cooperation with the occupiers. Despite alarmist rumors circulating in Baghdad that "One million Iranians had infiltrated into Iraq with fake Iraqi ID cards," most of the Iranians on view were pacific pilgrims thronging the shrine cities of Najaf and Karbala. The consensus in Tehran appeared to be that Iraq should be maintained in what officials called "managed chaos;" both to keep the country weak and discourage a prolonged US occupation while avoiding the wholesale disintegration of Iraq into anarchy.

However, the defeat of Rafsanjani by Mahmoud Ahmadinejad in the Presidential election and the steadily escalating confrontation with the US over Iran's nuclear program have changed the rules of the game. Ahmadinejad is close to some of the more radical IRGC leaders, and shows little desire to defer to American sensitivities. His outspoken defiance of the west over the nuclear issue, not to mention his remarks about Israel, have only bolstered his political position at home, while his ability to play the Iraq card should certainly give Washington pause. As a close aide to one of the leaders of SCIRI, which is generally considered less violently radical than Moqtada Sadr's group, told me recently "If America attacks Iran, then all bets are off." With such a deterrent at hand, who needs a nuclear weapon?