With talks due early next week with top Iranian nuclear negotiator Ali Larijani, EU foreign policy chief Javier Solana warned against any firm action on sanctions which could compromise the discussions.
"Since we are going to have a period of talks, during this period of talks it would not be reasonable to move on" with sanctions, he said on the sidelines of a meeting of European Union foreign ministers in Finland.
A UN security council deadline for Iran to suspend uranium enrichment - a process used to run a nuclear power plant or potentially fuel an atomic bomb – has passed without Tehran's compliance.
Iran maintains that it is exercising its right to develop civilian atomic energy but there are fears it is trying to build a nuclear bomb.
Its defiance has forced the EU to tread a diplomatic tight-rope - working toward punitive measures with the US without compromising the promised new dialogue, however unsatisfactory in the past, with Iran.
EU diplomacy
"European Union diplomacy remains the No.1 way forward," said Finnish Foreign Minister Erkki Tuomioja, whose country as EU president was hosting the informal two-day meeting in Lappeenranta, southern Finland.
"I think we are all of us wanting to engage Iran seriously and if their response is truly what they say, that they are ready to engage in negotiations, then we have to see what the conditions are, if these can be met," he said.
Mr Solana, who will brief the ministers, will seek clarification from Larijani on Iran's 21-page response to an international package of political and economic incentives in exchange for Tehran suspending enrichment.
But he said the fact Europe is willing to talk does not mean Tehran has an unlimited amount of time to continue its nuclear activities and that he hoped to know soon whether the negotiations would be fruitful.
"That doesn't mean Iran has an infinite time," he warned.
However, in a telling sign of the delicate state of affairs, he said: "I don't want to talk about anything before that meeting that is not of a positive nature."
But with Washington pushing inexorably for sanctions, Mr Tuomioja suggested the issue would be brought up by the ministers tomorrow.
"I am sure that all aspects will be covered," he said.
Dutch Foreign Minister Ben Bot indicated the punitive measures would be an important elements of the negotiations in the days ahead.
"If Iran shows willingness to be reasonable on the issue of enrichment then of course we will be reasonable as far as sanctions are concerned," he said.
While the US has said UN-level talks on sanctions would not take place before Solana's talks, Russia and China appeared to more likely to reject them when that discussion does arise.
Meanwhile Russian Foreign Minister Sergei Lavrov said Moscow wanted to resolve the issue but avoid measures that would complicate matters.
"A way out needs to be sought through dialogue and not through the path of isolation and sanctions," he said.
Russia and China have consistently resisted calls for sanctions against Iran, preferring a diplomatic solution to the crisis.
However US Undersecretary of State Nicholas Burns, who will represent Washington in Berlin, said he expected the Security Council to adopt a sanctions plan within a month.
Germany and France said maintaining international unity was the priority.
"The most important thing, something we have succeeded in doing in the past, is to keep sending in the future the signal that the international community is united," said German Foreign Minister Frank-Walter Steinmeier.
Iran's curt warning
Meanwhile in Iran, President Mahmoud Ahmadinejad sent a curt warning to the global powers that Iran "will not give up one iota" of its nuclear rights.
"The enemies should know Iranians are standing firm on obtaining their rights and will not give up one iota of their nuclear rights," president Ahmadinejad told a rally in the northwestern city of Makou, state media reported.
The deputy chief of Iran's nuclear agency insisted the report was "not negative" and vowed to continue uranium enrichment for research purposes while keeping open negotiations with the international community.
"The report is very factual and adds that the Iranian nuclear programme is under the supervision of the IAEA and that there has been no deviation" towards any military purpose, he said.
Iranian foreign ministry spokesman Hamid Reza Asefi said the IAEA report "clearly shows that Iran has acted within the framework of the international safeguards and Non-Proliferation Treaty and is ready to answer the remaining issues through talks with the IAEA."