Tim Friend, Al Jazeera's correspondent in Vienna, described the announcement regarding France as "dramatic news".
Friend said: "According to Iranian state television, Iran says it's not prepared to sit down with the French delegation ... because it says France has failed to deliver nuclear materials in the past.
"It's difficult to see, if that is the case, how these talks can proceed. The mood here certainly isn't one of optimism, it's one of extreme caution."
Monday's talks had been seen by Western diplomats as the first chance to build on the Geneva proposals for defusing tensions over Iran's nuclear programme.
Iran has sent only a junior-level technical delegation to the Vienna talks indicating it may not be ready for a final agreement this week.
"The talks this week are supposed to seal the deal," said a senior Western diplomat, who requested anonymity.
"But, since we have had no negotiations thus far with the Iranians, the next couple of days could reopen a lot of what we hoped was already agreed in principle."
Shirzadian told the official IRNA news agency that providing fuel for its Tehran reactor was "a good test to see whether the West is honest with Iran" and that Iran's programme to produce five-per-cent LEU would continue, whatever the outcome.
"We will never abandon our right [to enrich]," he said.
The meeting may also be clouded by Iranian allegations that the US and Britain backed fighters who killed 42 people, including six senior Revolutionary Guards commanders, in a suicide bombing on Sunday.
LEU is used as fuel for nuclear reactors, while a nuclear bomb requires highly-enriched uranium.
|Iran won a reprieve from harsher UN sanctions during meetings in Geneva [EPA]
Several world powers fear Iran's nuclear programme is a front to obtain a bomb but Iran denies the charge and says it needs nuclear technology to generate power.
Western diplomats say Tehran must ultimately curb the programme to dispel fears of a growing LEU stockpile being highly enriched to produce nuclear weapons.
The Vienna talks are likely to run for two to three days and intended to finalise technical and legal aspects of the uranium proposal.
Western diplomats said Iran had signalled in Geneva that it was ready to ship about three-quarters of its declared stockpile of five-per-cent-enriched uranium to Russia for refinement to 19.7-per-cent purity, then to France for fabrication into fuel rods.
The material would replace the dwindling reactor fuel with material in a form that is resistant to higher enrichment.
For the powers, the deal's payoff lies in greatly reducing Iran's LEU reserve.
The stockpile has no apparent civilian use since Iran has no operating nuclear power plants, but is now enough to fuel one atomic bomb, if Tehran chose to enrich it to 90 per cent.
Western officials expect the deal to entail Iran sending out 1.2 tonnes of its LEU in one consignment before the end of 2009.