Tehran had already rejected a proposal by the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), to ship most of its low-enriched uranium to Russia and France for processing into fuel for the research reactor.

However, even if Tehran started working on the fuel production immediately, it would probably take years before it can master the technology to turn uranium, enriched to the level of 20 per cent, into rods that make the fuel.

Iran says it is ready for a fuel swap "in several stages," and, in late December, Mottaki said Iran was open to exchanging uranium on Turkish soil.

Under pressure

Earlier in December, Iran proposed to exchange 400kg of uranium on its Gulf island of Kish but the offer was dismissed by the US, with the IAEA already having ruled out swap on Iranian soil.

World powers have been pushing for Iran to accept the  UN-brokered deal and are also mulling plans to impose fresh UN sanctions against Tehran after the country dismissed the year-end deadline.

Iran is already under three sets of UN sanctions for refusing to abandon its sensitive programme of uranium enrichment, the process which produces nuclear fuel or, in highly extended form, the fissile core of an atomic bomb.

The UN has demanded Iran suspend all enrichment, a demand Tehran refuses, saying it has a right to develop the technology under the Non-Proliferation Treaty.

Iran has also defiantly announced it intends to build 10 new uranium enrichment sites, drawing a forceful rebuke from the UN nuclear watchdog agency and warnings of the possibility of new UN sanctions.