Iran has not rejected a UN-brokered offer to exchange enriched nuclear fuel but it wants a staged swap rather than a wholesale handover of most of its stockpile, foreign ministry officials said in comments published Thursday.

"Iran did not reject the principle of the exchange (of nuclear fuel)," Foreign Minister Manouchehr Mottaki was quoted as saying by the Mehr news agency.

His denial followed charges by Western diplomats that Iran had effectively rejected a proposal put forward by six major powers in talks in Vienna brokered by the International Atomic Energy Agency, the UN's nuclear watchdog.

"Our position has not changed from what we already expressed in the past -- we are ready for a gradual exchange of fuel," Mehr quoted foreign ministry spokesman, Ramin Mehmanparast, as saying.

But his comments suggested that Iran remains at odds over the proposals with the six powers -- Britain, China, France, Germany, Russia and the United States.

The IAEA plan calls on Iran to hand over most of its stocks of low-enriched uranium in return for the phased supply by France and Russia of nuclear fuel enriched to the higher level required for a Tehran research reactor.

Iran insists it will only hand over its stocks gradually as it receives the fuel.

Western diplomats in Vienna said on Wednesday that Iran's insistence on a phased exchange effectively amounted to a rejection of the IAEA offer.

Western governments regard Iran's prior handover of most of its stocks of low-enriched uranium as a central plank of the deal as it will provide reassurance that the stockpiles will not be covertly enriched further to the much higher level required for a nuclear weapon.

Iran has always denied any such ambition, insisting that its nuclear programme is for civilian programmes only.

But the IAEA said talks on its plan were still continuing, and that the offer to Iran remained on the table.

The proposal, made last October, "which was supported by France, Russia and the United States, continues to be on the table," said the watchdog's spokeswoman, Gill Tudor.

"The IAEA is not in a position to discuss the views of the parties involved, but it is aware that they are considering the best solution," Tudor added.

A Western diplomat in Vienna told AFP that Iran had effectively given a formal response at a meeting between its ambassador Ali Asghar Soltanieh and the IAEA's new new chief Yukiya Amano earlier this month.

According to the diplomat, Soltanieh had verbally reiterated the Islamic republic's earlier position, including the insistence on a gradual swap.

The IAEA refused to say whether the meeting took place or discuss its possible content.

Another diplomat said it was unclear whether Iran had actually delivered a written response. But "certainly there was no agreement to the TRR (Tehran research reactor) proposal," the diplomat said.

After the proposal was delivered to Iran in October, the powers gave it until the turn of the year to accept the deal but the deadline was ignored, prompting talk of fresh sanctions.

In Washington on Tuesday, US State Department spokesman Philip Crowley said: "I am not sure that they have delivered a formal response, but it is clearly an inadequate response."

On January 5, Iran repeated its counter-proposal for a phased fuel swap, but left the "details" open to discussion.

Mottaki has insisted that Tehran in fact has until the end of January to reach a uranium swap deal, stressing it will press on with plans to enrich nuclear fuel to a higher level itself if there is no agreement.

Mottaki gave the West a one-month "ultimatum" to accept the Iranian counter-proposal.

Iran is already under three sets of sanactions over its refusal to heed repeated UN Security Council ultimatums to suspend enrichment.

The sensitive process lies at the heart of Western fears over Iran's nuclear programme as it can produce the fuel for nuclear reactors or in highly extended form the fissile core of an atomic bomb.

earlier related report
Six powers count on unity to check Iran nuclear ambitions
Washington (AFP) Jan 20, 2010 - Six international powers are counting on unity to check Iran's nuclear ambitions, according to a European diplomat who expects China to drop its opposition to new sanctions for fear of isolation.

As Iran balks at a confidence-building proposal, the five permanent members of the UN Security Council -- the United States, Russia, China, France, and Britain -- plus Germany are increasingly weighing sanctions.

The negotiating group, known as the P5-plus-1, looks likely to head back to the United Nations.

"The unity of the P5-plus-1 is our major asset, our major aim," a high-ranking European diplomat said on the condition of anonymity.

"I'm not saying it's easy, but I'm confident we'll get to the Security Council," according to the diplomat who is close to the talks on Iran.

The P5-plus-1 has been reaching out to Iran in a bid to force the regime to halt its uranium enrichment.

But Iran has long equivocated in response to an offer from the Vienna-based UN International Atomic Energy Agency (IAEA) to ship abroad low-grade nuclear fuel so it can be further enriched and returned to refuel a Tehran medical research reactor.

In Vienna, diplomats said Wednesday the Islamic Republic had effectively rejected the deal because it refused to accept some of the conditions called for by the West and insisted on a simultaneous exchange of fuel.

Western countries have ruled out such an exchange as unacceptable.

The proposal made by the IAEA last October, "which was supported by France, Russia and the United States, continues to be on the table," said IAEA spokeswoman, Gill Tudor.

The proposal is designed to buy breathing room as the big powers try to halt Iran's uranium enrichment -- which the West fears masks a drive to build a nuclear bomb.

Denying the charge, Iran says it seeks peaceful uses of nuclear energy.

The diplomat said the Europeans have never really believed that Iran would accept the IAEA offer.

However, they were convinced that this stage of dialogue was necessary to reinforce the threat of new sanctions, something Western powers increasingly support.

China, which has economic links with hardline Iranian President Mahmoud Ahmadinejad, favors continued dialogue, but it also wants to avoid international isolation, the diplomat said.

"It's difficult when you share a statement... and when everybody agrees on that, to remain isolated. You just cannot stand this position for too long," the senior diplomat said.

Beijing is under all the more pressure, he added, as Russia is now on the same wavelength as the West.

"The Russians have changed their attitude... They are very helpful. They changed after the unveiling of the second site in Qom," the diplomat said.

The United States and other powers forced Iran to come clean in September on a second uranium enrichment site buried in a mountain near the holy city of Qom.

The tightening of ranks among the six powers has already produced results, the diplomat said, citing a unanimous vote by the negotiating group members for an IAEA resolution condemning Iran last November.

The United States and its European allies are hoping that the six powers will be in a position to present a new UN resolution in February.

The Security Council will be chaired then by France, before passing to Gabon in March, then Japan in April. It will then be involved in the review of the nuclear non-proliferation treaty in May.

The Western powers refuse meanwhile to discuss a hard-and-fast deadline for their efforts, aware that convincing Beijing to join them will take time.

In the event of failure, and as the impasse with Tehran lasts for months, the Europeans may end up by having to "take their responsibilities," in other words impose sanctions of their own, the diplomat said.

The idea is one being weighed on both sides of the Atlantic.

"We continue our conversations in terms of options that are available to us, both in terms of the Security Council going forward but also steps that can be taken in a coordinated way on a national basis," State Department spokesman Philip Crowley said Tuesday.