UNITED NATIONS - The U.N. Security Council on Monday demanded that Iran suspend its nuclear activities by August 31 or face the threat of sanctions, but Tehran denounced the move as illegal and vowed to press on.

File picture of Iranian technicians at the Isfahan Uranium Conversion Facilities (UCF), 420 kms south of Tehran. The UN Security Council has ordered Iran to halt its controversial nuclear activities by August 31 or face the threat of sanctions.[AFP]

In a resolution passed by 14 to 1, the Security Council for the first time included legally binding demands on Iran and a sanctions threat.

Qatar, the only Arab member, voted against it.

The resolution, which followed weeks of negotiations, demanded that Iran "suspend all enrichment-related and reprocessing activities, including research and development."

If Tehran does not comply by the deadline, the council would consider adopting "appropriate measures" under Article 41 of Chapter 7 of the U.N. Charter, which refers to diplomatic and economic sanctions.

The United States and its allies suspect Iran is developing a nuclear bomb and accuse it of hiding its research for the past 18 years.

But Iran's U.N. Ambassador Javad Zarif recited Tehran's history of alleged mistreatment by the West, including a lack of action when Saddam Hussein's Iraqi government used chemical weapons against his country.

He said "Iran's peaceful nuclear program poses no threat to international peace and security and therefore dealing with this issue in the Security Council is unwarranted and void of any legal basis or practical utility."

"The people and government of the Islamic Republic of Iran are determined to exercise their inalienable right to nuclear technology for peaceful purposes," Zarif told the council.

In Tehran, Kazem Jalali, a spokesman for the Iranian parliament's foreign affairs and security commission, said the resolution was "unacceptable" and would create a situation where no one benefits.

"It seems America has done its utmost to divert Iran's case from the path of dialogue and drag it into crisis," Jalali told the Students News agency.

But President George W. Bush told reporters during a trip to Miami it was "a strong resolution."

"The Iranians must hear loud and clear with this resolution the world's intent, upon working together, to make sure that they do not end up with a nuclear weapon," Bush said.

European delegates took pains to emphasize that if Iran cooperates and suspends its uranium enrichment activities, a package of energy, technological and commercial incentives, offered in June would be forthcoming.

"The choice is Iran's. The door to negotiations is open," said German Foreign Minister Frank-Walter Steinmeier in Berlin.

"Our proposals suggest a procedure for reviewing the moratorium once international confidence in Iran's intentions has been restored," Britain's U.N. Ambassador Emyr Jones Parry told the council. "But the continuation of enrichment related and reprocessing activities, including research and development, would allow Iran to develop the know-how to produce fissile material suitable for use in nuclear weapons."

While U.S. Ambassador John Bolton characterized Zarif's address as a rejection, Russia's U.N. Ambassador Vitaly Churkin said he preferred to view Iran's response in a positive light because Zarif did not specifically use the word "rejection."

Bolton said Iran had not been in compliance with the demands of the U.N. nuclear watchdog agency, the International Atomic Energy Agency, for three years.

"Sadly, Iran has consistently and brazenly defied the international community by continuing its pursuit of nuclear weapons, and the continued intransigence and defiance of the Iranian leadership demands a strong response from this council," Bolton said.

Russia and China are reluctant to impose sanctions and Churkin has said the sanctions provision meant the council would only have "a discussion" on punitive measures.

Iran has said it would respond to the incentives package on August 22. But Zarif accused European and American negotiators of drawing "arbitrary red lines and deadlines that have closed the door to any compromise.

The resolution was adopted under Chapter 7 of the U.N. Charter, which makes it mandatory and provides options for enforcement. The document excludes any military action.

Qatar's U.N. ambassador, Abdulaziz Al-Nasser, said he voted "no" because of the conflict between Israel and Hizbollah militants. "We do not agree with the resolution at a time when our region is in flames," he said.