Paris: Iran's decision to go ahead with its uranium enrichment cycle despite international demands to the contrary, have left the Europeans in a quandary. Europe has ruled out the military option against Tehran and Iran has decided to call the West's bluff over threats of U.N.-imposed sanctions.

Now E.U. leaders are trying to hedge their way out since they clearly do not wish to go the sanctions route as hastily as Washington does. France said it was "still hopeful" that Iran would respond positively to "international demands" that it freeze uranium enrichment, Foreign Minister Philippe Douste-Blazy said in Paris on Thursday as the U.N. deadline on uranium enrichment by Iran began running out.

"Today is August 31, the last day for Iran to give its response, which we hope will be positive. In any case, we hope that we can have a dialogue because France too wants a dialogue with the Iranians, while asking them to suspend sensitive nuclear activities," Mr. Douste-Blazy said.

German Chancellor Angela Merkel said she would deeply regret a decision by Iran to ignore a U.N. deadline to stop uranium

"We made Iran a very, very good offer," she said, referring to a package of security, trade and technology incentives offered to Iran by the five permanent members of the United Nations Security Council plus Germany in exchange for halting sensitive nuclear work.

"We will not slam the door shut," Ms. Merkel said adding the international community could not ignore Tehran's actions.

The U.S., France, Britain and Germany were reportedly drawing up plans for a three-stage system of international sanctions designed to force Iran into compliance.

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