The Soviet-built Metzamor plant, 30 kilometres (18 miles) west of the Armenian capital Yerevan, supplies 40 percent of the energy in the former Soviet republic.

It was commissioned in 1980 but closed temporarily because of an earthquake in 1988.

"Safety is very important to us," said Torben Holtze, head of the European Commission delegation here.

"The EU will give Armenia 100 million euros to create alternative energy production when Armenia sets a date for the closure of the power plant," he told journalists.

But Armenian Finance Minister Vardan Khachatrian said his country would need a billion dollars to compensate for losses if the nuclear plant closes.

The question of closure was "a very painful question for us," he said. "We will not close the plant until we have alternative energy sources."

He said construction of a gas pipeline between Iran and Armenia set to begin this year would speed moves towards alternative energy.

The nuclear plant was closed down temporarily in 1988 because of an earthquake at Spitak, but resumed operating in 1995 in order to help stave off a national energy crisis.

The EU signed an accord with Armenia on closing the plant this year but Armenia has failed to meet this deadline.

Officials here say the plant is capable of operating until 2018.

Gaguik Markossian, the plant's director, said in December that international credits and aid had allowed Armenia to make many safety improvements at the plant, which includes two 440-megawatt reactors, only one of which is in operation.

With electricity supplies reduced to three or four hours a day and industry in crisis, one of the reactors was restarted in 1995. Since then about 35 million dollars (28 million euros) have been spent on various safety improvements.

The Institute for Applied Ecology in Austria says the Armenian plant, along with similar units in Bulgaria, is among the most dangerous in Europe.

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