Iran has said it is ready for a one-shot nuclear fuel exchange on its own soil, edging closer to the conditions of a plan drawn up by the UN atomic watchdog last year as major powers mulled a new round of sanctions.

Iran's atomic chief Ali Akbar Salehi revealed the new offer in an interview published by hardline daily Jawan on Wednesday, signalling a major change in Tehran's longstanding position on the nuclear fuel plan first drafted last October.

Salehi said Iran is ready to deliver 1,200 kilogrammes (2,640 pounds) of low-enriched uranium (LEU) in one go in return for fuel for a Tehran medical research reactor, but the exchange must be inside the country.

Salehi, who is also a vice president, said Iran had earlier proposed to deliver its LEU only gradually in batches of 400 kilogrammes (880 pounds).

"But this has no technical justification because those who want to produce the (20 percent enriched) fuel say that this amount has no economic justification," Salehi said.

"What we are saying now is that we are ready to deliver the total amount of fuel in one go, on condition that the exchange take place inside Iran and simultaneously.

"We are ready to deliver 1,200 kilos and to receive 120 kilos (264 pounds) of 20 percent enriched uranium."

According to the latest report by the UN atomic watchdog, Iran currently has around 2,065 kilogrammes (4,543 pounds) of LEU which it processed at its Natanz plant in defiance of repeated Security Council ultimatums and three rounds of UN sanctions.

Iran's latest offer is significant as it had previously baulked at the idea of delivering 1,200 kilos of LEU in one go, insisting that it would only hand over the stocks in phases.

Under the plan drawn up by the International Atomic Energy Agency (IAEA), Russia would have produced the 20 percent enriched uranium, which would have then been converted into fuel by France.

Iranian officials had strongly opposed the plan as they saw it as a ruse by Western powers to deprive Iran of its uranium stockpile, and had put forward a rival proposal to either buy the 20 percent enriched uranium fuel on the international market or conduct a fuel swap in stages on Iranian territory.

Uranium enrichment is the most controversial part of Iran's nuclear programme as Western governments fear some of the stocks could be covertly diverted for further enrichment to weapons grade, a suspicion rejected by Iran.

Tehran infuriated Washington in February by starting to enrich uranium to 20 percent itself, seen as a key step towards the 93 percent level required to make a weapon.

Salehi said what was important for Iran was that the fuel exchange happen on its own soil and that it be given guarantees it would receive the 20 percent enriched uranium.

"When we say that the exchange has to happen inside Iran, it means the (International Atomic Energy) Agency will take control of 1,200 kilos of our LEU and then seal it," Salehi said.

He said the UN watchdog's representatives could then "monitor it 24 hours a day and ensure that nobody broke the seal".

"When they (the major powers) deliver the 20 percent fuel to us, they can then take the LEU out of the country."

He also insisted that Iran has the right to enrich uranium to 100 percent "but we don't need beyond 20 percent."

Western governments have opposed the idea of exchanging the fuel inside Iran and in recent weeks have stepped up pressure for a new round of UN sanctions against Tehran with Moscow's support.

But one of the five veto-wielding permanent members of the Security Council, China, is still holding out against new sanctions with the support of some non-permanent members.

"This issue has to be appropriately resolved through peaceful negotiations," Chinese Foreign Minister Yang Jiechi said in Beijing on Tuesday after talks with his British counterpart David Miliband.

Turkish Prime Minister Recep Tayyip Erdogan, whose government currently holds a non-permanent seat, said after talks in London on Tuesday: "We believe in the importance of a diplomatic solution."