Iran's president has said that a UN-drafted uranium exchange deal remains a possibility with talks on the proposal "not yet closed".
Speaking in Tehran on Tuesday, Mahmoud Ahmadinejad dismissed the assertions of the United States and its allies that the plan was effectively dead after Iran had begun the process of further enriching uranium to 20 per cent.
"We have already announced that we are ready for a fuel exchange within a fair framework," Ahmadinejad said during the televised news conference.
"We are still ready for an exchange, even with America," he said.
Ahmadinejad said Iran had not planned to produce the further enriched uranium domestically, because it had a low amount of uranium stocks that it wanted to enrich and the move was not economical, but was forced to do so.
"We told them that if they don't provide us [with the fuel] in due time we would start work inside [Iran]," he said.
"Even now, if they provide us with the necessary fuel the conditions will be changed."
Last week, Ahmadinejad's announcement that Iran was starting the production of higher-grade uranium to produce fuel for a medical research reactor led to new calls from the US and its allies for a fourth round of UN sanctions on Iran.
He responded to the threat by saying that world powers would regret any moves to impose new restrictions.
"If anybody seeks to create problems for Iran, our response will not be like before," Ahmadinejad said on Tuesday.
"Something in response will be done which will make them [the world powers] regret" their move.
Ahmadinejad's comments came on the same day that Hillary Clinton, the US secretary of state, warned that if Iran gets a nuclear weapon it could trigger a nuclear arms race in the Middle East.
Speaking to students at Dar el-Hekma women's college in the Red Sea port of Jeddah, she rejected Iran's insistence that it is not producing a nuclear bomb, saying: "the evidence doesn't support that".
However, when asked by a student why Israel did not have to give up its nuclear weapons, Clinton did not respond.
Earlier, in Qatar, on the first part of her trip to Persian Gulf, Clinton said that Iran was heading towards a "military dictatorship" and warned it posed an international threat.
"We see the government of Iran, the supreme leader, the president, the parliament is being supplanted and Iran is moving toward a military dictatorship," she told students at the Qatari branch of Carnegie-Mellon University.
Speaking at a news conference with Clinton in the Saudi Arabian capital of Riyadh on Monday, Prince Saud al-Faisal, the country's foreign minister, said the threat posed by Iran's nuclear ambitions demanded a more immediate solution than sanctions.
Watch Hillary Clinton's Middle East Town Hall meeting on Al Jazeera:
Tuesday at 1900 GMT, Wednesday at 0300 and 1400 GMT, and on Thursday at 0600 GMT.
Al-Faisal described sanctions as a long-term solution, and said the threat is more pressing.
"We see the issue in the shorter term because we are closer to the threat. We need immediate resolution rather than gradual resolution," he said.
However, he did not identify a preferred short-term resolution.
He also said efforts to rid the Middle East of nuclear weapons must be applied to Israel.
Israel, considered to be the Middle East's sole, if undeclared, nuclear power, views Iran as its main enemy after statements by Ahmadinejad that the Jewish state was doomed to be "wiped off the map".
On Monday, Binyamin Netanyahu, the Israeli prime minister, met Dmitry Medvedev, the Russian president, to ask for help in imposing "biting" sanctions on Tehran.
Russia subsequently said that Iran should improve its co-operation with the International Atomic Energy Agency (IAEA), the UN nuclear watchdog, and that new sanctions could not be excluded if Tehran failed to fulfil its obligations.
"Russia still believes that Iran should more actively and broadly co-operate with the IAEA and other countries," a spokeswoman for the Russian president said.
"If these obligations are not fulfilled no one can exclude the application of sanctions."
Russia has long said it favours peaceful resolution to the standoff with Iran, but signs have emerged over the past weeks that the Kremlin is losing patience with the Islamic republic .
Tehran has repeatedly stated that its nuclear programme is purely to meet the country's civilian energy needs.