TEHRAN,(Reuters) – Iran said on Friday that a nuclear standoff with the West could only be settled through negotiation while Russia called imposing punitive sanctions on Tehran for not ending sensitive atomic work a dead end.

European Union foreign ministers, meeting in Finland, want further dialogue with Iran rather than sanctions after Tehran defied Thursday’s U.N. deadline to stop work that the West fears could be a prelude to making a nuclear bomb, officials said.

At a two-day informal meeting near Finland’s border with Russia, the EU ministers were expected to seek fresh talks despite U.S. pressure for a rapid move to impose sanctions.

“The Islamic Republic of Iran believes the only possible way to achieve fair and acceptable results for all parties is through negotiations and by respecting Iran’s legitimate rights,” Foreign Ministry spokesman Hamid Reza Asefi said.

“Iran’s activities are transparent, public and have peaceful aims far away from any ambiguities and it (the issue) can be easily solved through negotiations,” he was quoted as saying by the official IRNA news agency.

The U.N. watchdog, the International Atomic Energy Agency (IAEA), said on Thursday that Tehran had failed to meet an Aug. 31 deadline to halt uranium enrichment.

The West accuses Iran of seeking to build atomic bombs, a charge Iran denies, saying its nuclear programme is designed to produce electricity.

The IAEA report also said Iran had recently resumed enriching small amounts of uranium and said Iran’s lack of cooperation had blocked the U.N. atomic watchdog’s probes.

Asefi said the report showed Iran had met its commitments under international regulations, including the nuclear Non-Proliferation Treaty, and also showed Iran’s “extensive cooperation” with the IAEA.

President Mahmoud Ahmadinejad repeated his defiant line on Friday, vowing never to give up Iran’s nuclear ambitions.

“The Islamic Republic of Iran will never retreat from its certain rights to peaceful nuclear activities,” Ahmadinejad was quoted as saying on state television. “The claims of Western countries who say Iran seeks nuclear weapons are sheer lies because we do not need nuclear weapons,” he said.

The European Union expressed continued concern.

“Unfortunately Iran has show that … for the moment at least it doesn’t plan to cooperate on the nuclear issue and it’s clear that on a matter of such importance the international community cannot stand idly by,” EU External Relations Commissioner Benita Ferrero-Waldner said.

“But at the same time we also said we want a diplomatic solution, so therefore I hope that the channels of communication can be still kept open,” she told a news conference.

EU foreign policy chief Javier Solana told Reuters he hoped to meet Iran’s chief nuclear negotiator, Ali Larijani, in the coming days to seek a clear answer to major power proposals for broad cooperation if Tehran halts uranium enrichment.

An EU diplomat said they were tentatively due to meet in Berlin next Tuesday, one day before six big powers meet in the German capital to chart next steps in the standoff with Iran.

An EU official said Finland, which holds the 25-nation bloc’s rotating presidency, did not want any substantial discussion of sanctions at their meeting.

Iran sent a confidential 21-page reply last week to explain its position but Western officials said it evaded the world community’s key demand to halt making nuclear fuel.

“We have to see if we can get some understanding of the elements of the document which are not clear enough for us and I think a meeting face to face could clarify that,” Solana said.

Finnish Foreign Minister Erkki Tuomioja, who will chair the meeting, said the EU should try to convince the Islamic Republic to give a straightforward answer and suspend enrichment.

Diplomats said Iran’s tactic was to fudge the deadline, and try to divide Russia and China from the West and the Europeans from the United States by dangling the possibility of a negotiated freeze on enrichment at a later date.

Russia’s foreign minister cast doubt on whether the U.N. Security Council can reach quick consensus on punitive measures.

“We take into account the experience of the past and we cannot ally ourselves with ultimatums, which all lead to a dead end,” Interfax news agency quoted Russian Foreign Minister Sergei Lavrov as saying.

“Yes, there are countries whose policies raise doubts, and cause discontent, but we all live in the same world and we need to … draw them into dialogue, and not isolation and sanctions.”