The US has dismissed an Iranian offer to exchange nuclear fuel, saying it was inconsistent with a deal that would allow Iran to avoid further sanctions.

"Iran's proposal does not appear to be consistent with the fair and balanced draft agreement proposed by the International Atomic Energy Agency [IAEA], the UN nuclear watchdog, a US official said on Saturday.

Manouchehr Mottaki, Iran's foreign minister, proposed that the country swap 880 pounds (400 kilogrammes) of low-enriched uranium for nuclear fuel in an exchange on Iran's island of Kish, in the Persian Gulf, as the first phase of a deal with world powers.

Deal breaker

However, according to the deal, in consultation with the US, Russia and France, the nuclear material was to be exchanged all at once and not in stages.

The IAEA had also previously ruled out a swap taking place inside Iran.

The US official, who declined to be named, said Iran's offer contained "nothing new" and urged the country to take up the existing IAEA proposal, which calls on Iran to send 2,645 pounds (1,200 kilogrammes) of its low enriched uranium to Russia "in one batch."

Under the plan Iran's uranium would be enriched to higher levels in Russia, turned into fuel rods in France and returned to power a research reactor in Tehran that produces medical isotopes.

The material in the fuel rods cannot be enriched to higher levels, denying Iran the ability to use it to make weapons.

Nuclear concerns

"We remain committed to these terms," the official said. "Unfortunately, Iran has been unwilling to engage in further talks on its nuclear programme.

"We urge Iran not to squander this opportunity."

In another change to the plan, Iran wants to receive the fuel rods immediately in simultaneous exchanges for its uranium because it says it is worried that France or Russia could renege on the deal.

Iran's stockpile of uranium is at the heart of international concerns because it offers Iran a possible pathway to nuclear weapons production if it is enriched to higher levels.

Tehran insists it only wants to use the material to produce fuel for power plants and for other peaceful purposes.

Last month, the 35-nation board of the IAEA endorsed a resolution from the six powers, the US, Russia, China, Britain, France and Germany, criticising Iran for defying a UN security council ban on uranium enrichment and continuing to expand its operations.

It also censured Iran for secretly building a second enrichment facility and demanded that it immediately suspend further construction on it.